Competition in the smoothed fund market is benefiting investors by driving down costs and pushing up returns, Standard Life’s head of fund solutions Andy Brown has insisted.
Speaking to Money Marketing, Brown said that, for the best part of 15 years, there was really only one smoothed fund in the UK market.
This was Prudential’s PruFund, launched in November 2004.
But now, there are several competitors.
“I think that’s down to technological improvements – the ability to plug in and out of systems really makes a difference,” said Brown.
“There are now different smoothing mechanisms in use. Some are built on a with-profits basis – like Pru, Wesleyan and LV=. Others, like Aviva, are unit-linked.
“Some use expected growth rates, like us, Wesleyan to a certain extent, and Aviva. Others use a smoothed average approach, as Legal & General do.”
Advisers either love or hate ‘marmite’ smoothed funds
Brown said that all of these funds aim to do “roughly the same thing”, just in slightly different ways.
“I think that’s good for the industry. It’s no longer just a case of pointing to one option,” he added.
“When clients have three, four, or five to choose from, it introduces competitive tension.
“That competition helps the market work more efficiently, encourages simplicity and transparency, and ultimately benefits the customer – driving down costs and pushing up returns.”
Standard Life launched its own smoothed fund with Fidelity International in February 2024.
The Standard Life Smoothed Return Pension Fund is designed to help address the increasing need for product innovation in retirement solutions, providing “greater choice” for those planning for or already at retirement.
As of 31 March 2025, the fund had a volatility rating of 4 out of 7 and a fund size of £55.5m.
Smoothed funds can suit a variety of different clients, but Brown suggested they are especially useful for medium-to-low risk investors in their late 40s to 50s preparing for retirement.
As these clients shift from equity-heavy strategies to lower-risk options, smoothing mechanisms help protect against market volatility and behavioural pitfalls.
In early retirement, when individuals may reduce work before drawing pensions, smoothed funds offer stability and reliable income for essentials.
They also serve as a discretionary income pot – complementing state or guaranteed income – helping with larger, irregular costs like home improvements or holidays.
He suggested the relevance of a smoother fund may decline by age 75 due to rising annuity appeal.
