The Pension Trap: Why Scottish Widows Pension Portfolio Two (CS8) Holds You Back

When you look at a pension fund, the headline numbers often seem reassuring. The Scottish Widows Pension Portfolio Two CS8 has returned +57.8% over the past five years. Respectable? On paper, yes. In reality, the numbers tell a different story.

Analysis of Scottish Widows Pension Portfolio Performance.pdf

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The Maths: From Total Return to Annualised Growth

That 57.8% over five years works out to a compound annual growth rate (CAGR) of:

So, your money compounded at just under 10% per annum. Not bad, until you compare it with the market alternatives.

• MSCI World (GBP, TR): ~13% p.a.

• FTSE All-Share (TR): ~11.5% p.a.

• Vanguard LifeStrategy 80%: ~8.7% p.a.

• Scottish Widows PP Two CS8: 9.5% p.a.

The 5-Year Opportunity Cost

Here’s how £100,000 would have grown in different strategies over the past five years:

• Scottish Widows PP Two CS8: £157,800

• MSCI World: £184,000

• FTSE All-Share: £172,000

• Vanguard LS80: £151,800

The result? Scottish Widows sat in the middle – better than a cautious balanced fund, but far behind simply buying the world index.

The Long-Term Damage: Compounding Over 20 Years

Here’s where it really hurts. Retirement investing is about decades, not five years.

Starting with £100,000 and compounding at these annualised rates for 20 years:

• MSCI World (13% p.a.) → ~£1.15 million

• FTSE All-Share (11.5% p.a.) → ~£880,000

• SW PP Two CS8 (9.5% p.a.) → ~£620,000

• Vanguard LS80 (8.7% p.a.) → ~£530,000

That’s a gap of over half a million pounds between a cautious choice like Pension Portfolio Two and global equities.

Why the Underperformance?

1. Built-in caution: Portfolio Two is a “risk level 2” product, designed for safety, but in doing so it systematically sacrifices growth.

   
   

2. Fee drag: With an ongoing charge of ~0.46%, it costs 4x more than a global tracker ETF.

   
   

3. Bond-heavy allocation: Bonds have had one of their worst decades in history, dragging performance further down.

The Verdict

Scottish Widows PP Two CS8 isn’t a disaster – but it isn’t good enough either. For someone saving towards retirement, the difference between 9.5% and 13% compounded annually is life-changing.

If your pension is stuck in this fund, ask yourself: do you want “respectable mediocrity” or do you want your money to work as hard as possible for you?

Because in pensions, the real risk isn’t volatility – it’s running out of money.

Disclaimer: This content is opinion based on the disclosed facts and sources above, including fund factsheets, benchmark data, and publicly available filings as at time of publication. An honest person could hold this opinion on those facts (Defamation Act 2013, s.3). I publish this in the public interest to inform UK savers about costs, risk, and performance of widely‑marketed products (s.4).

Alpesh Patel OBE

www.campaignformaillion.com