Pensions provider Now Pensions has blamed trustees’ decision to currency hedge for its poor investment returns, after facing an awkward line of questioning from the Work and Pensions Select Committee.

Giving evidence on the progress of auto-enrolment in front of the Committee today, 23 January, Now Pensions director of policy, Adrian Boulding, was forced to defend his scheme's returns after Conservative MP for Amber Valley, Nigel Mills, singled out the provider.

The Committee was questioning providers, which also included Nest, The People’s Pension (TPP) and Legal and General Investment Management on whether their investment returns were sustainable over the long-term.

Mills said: “Nest's three year annualised return was 11 per cent, The People’s Pension 9.9 per cent, Legal and General 10.8 per cent. These all seem like good annualised returns, Mr Boulding, Now Pensions, 3.1 per cent. What’s gone wrong?”

Responding, Boulding said: “Well, the Now Pensions return measured over the shorter term is lower than a lot of the others because our trustees took a decision to currency hedge.

"They took a view that they did not want to expose customers to currency fluctuations.

“We’ve been through the Brexit vote and the pound has gone down considerably over the dollar and other major international currencies. So in that short term, yes the member would have been better off if the trustees had decided to expose them to currency fluctuations which other funds have done. But I think over the long term it will even out."

Now Pensions works on the basis that the pensions trustee board shoulders the responsibility for the investment strategy which it believes is “beneficial to the long-term wellbeing of its members”.

In contrast, Mills also questioned TPP on whether its investment returns would be sustainable in the long-term.

TPP director of policy and external affairs, Gregg McClymont, said that given recent fall in market performance, it would be reducing risk in its investment portfolio by diversifying its assets.

“Risk reduction is a good thing, but reducing risk means diversification which takes you into a cost argument … The Treasury wants funds to look at patient capital, investing in late-stage venture capital which is a really interesting approach, but how can it be done in a way that you’re not paying too much for your investment?” he added.

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