Auto-enrolled defined contribution members in poorer-performing schemes could lose up to the equivalent of £500,000 over a lifetime.
That finding has come from research by JLT Employee Benefits, which revealed the performance of the top 10 defined contribution (DC) default funds has ranged from around 3.5-9.5% a year over the last three years.
It said this meant that those auto-enrolled into the lowest performing funds have lost the equivalent of six percentage points compared to those in the best-performing funds.
Volatility also differed sharply among the top 10 funds, ranging from 5.3-11.3%, which the company said showed the importance for companies to choose the best default strategy and provider for their employees when setting up a DC pension scheme, and to then monitor performance.
Maria Nazarova-Doyle, JLT Employee Benefits head of DC investment consulting, said those in less well performing funds could see "a huge, irreversible repercussion on members' financial position at retirement.
"While there may be a very good reason why a certain provider/default strategy is selected, it is paramount that this decision is reviewed regularly in light of the default's risk adjusted performance, as well as changes in regulations, scheme demographics and wider investment universe."
She said this problem was far more significant than that of investment fees, even though the latter attracted greater attention.