Why Scottish Widows Pension Portfolio Two (CS8) Has Delivered Poor Returns

Investors who put their retirement money into the Scottish Widows Pension Portfolio Two CS8 might be feeling rather short-changed.

The fund has posted a 57.8% gain over the past five years (to 21 September 2025). At first glance, that sounds encouraging. But let’s break it down and compare it with the competition.

Scottish Widows Pension Portfolio Two Performance Analysis.pdf

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The Maths: From Total Return to Annualised Return

A 57.8% total return over 5 years translates into a compound annual growth rate (CAGR) of:

So, investors have effectively been compounding at just under 10% annually. Not disastrous in isolation – but context matters.

• MSCI World Index (GBP, Total Return): ~13% annualised over the same five years.

• FTSE All-Share Index (Total Return): ~11.5% annualised.

• Vanguard LifeStrategy 80%: ~8.7% annualised.

This puts Scottish Widows PP Two CS8 in the middle of the pack. It beat a balanced multi-asset option like Vanguard LS80, but lagged global equities and even the straightforward FTSE All-Share.

In other words: if you’d simply bought the market through a cheap passive tracker, you’d likely have more in your pension pot today.

Why the Underperformance?

The design of the Scottish Widows “Pension Portfolio” range is the culprit.

1. Conservatism baked in: Pension Portfolio Two is a “risk level 2” product. It is deliberately cautious, with a heavy tilt towards bonds and only modest exposure to global equities. That positioning is fine if your priority is capital preservation – but in an era when equities have powered ahead, it has meant systematically missing the upside.
   

2. Cost drag: According to Trustnet, the ongoing charge is around 0.46%. Not eye-watering, but noticeably higher than many passive global trackers that charge 0.10% or less. Over five years, that fee difference chips away at returns.
   

3. Strategic asset allocation mismatch: The fund holds a blend of equities, bonds, and other assets that is meant to match a cautious risk profile. Unfortunately, in the last five years, bonds have been through one of their worst bear markets in modern history (particularly 2022). That meant the bond allocation didn’t provide the stabiliser investors expected – instead, it acted as a drag.

The Investor’s Dilemma

If you chose Pension Portfolio Two CS8 because you were told it was a “safe” home for your money, you’ve effectively paid for caution that didn’t deliver on its promise. Yes, the ride has been smoother than all-equity strategies.

But the trade-off is that your wealth has compounded slower than the global market – and, crucially, slower than you might need for a long retirement.

The Verdict

Scottish Widows Pension Portfolio Two CS8 is not an outright disaster – 9.5% annualised is respectable on paper. But investors must ask the hard question: is “respectable” good enough when the market has been compounding at 13%?

In pensions, the cost of underperformance is brutal. A few percentage points less per year doesn’t sound like much, but compounded over decades it can mean tens of thousands less in your retirement pot.

For savers who genuinely want a cautious stance, PP Two CS8 does the job. But for anyone seeking to grow their pension meaningfully, this fund looks more like an anchor than a sail.

Key Takeaways

• PP Two CS8 is middling: Better than Vanguard LifeStrategy 80% (which is designed to be cautious), but weaker than a straight equity allocation.

• Equities outperformed: Both MSCI World and FTSE All-Share trounced PP Two CS8 in annualised terms.

• Fees bite: Scottish Widows’ ~0.46% charge is four times higher than a cheap ETF. Over decades, that compounds into a serious drag.

⚠️ 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). This article is provided for educational and informational purposes only. It is not investment advice or a recommendation to buy, sell, or hold any financial product. Past performance is not a reliable indicator of future results, and returns are not guaranteed. All investments carry risk, including the potential loss of capital.

Comparisons shown here are based on publicly available data and are intended to highlight performance differences and cost impacts. They do not take into account your individual circumstances, objectives, or risk tolerance. Alpesh Patel OBE www.campaignforamillion.com