The impact which an additional 1, 2 or 3 per cent return per annum can have on final pension fund values can be very significant and underlines the importance of picking the right pension product and the right fund manager.

The latest Irish Times pension-fund survey shows that over 15 years, the difference between the best and worst unit-linked results is 4.5 per cent per annum.

Those whose funds were invested with Hibernian Life, the worst unit-linked performer over that period, received an annual return of just 9.95 per cent compared to New Ireland investors who enjoyed a net yield of 14.46 per cent. But as the accompanying table illustrates, that gap can make a huge difference to the value of your fund.

A fund yielding 10 per cent per annum would be worth £35,060 after 10 years, 26 per cent less than the value of the fund which yielded 14 per cent.

Over 20 years, the difference is even more marked, amounting to 66 per cent and to a staggering 125 per cent over 30 years.

According to FDM, it is important that investors diversify their personal pension funds as even top fund managers can become laggards, particularly if senior staff move.

"It makes no sense to put all your eggs into one basket even if that basket has underlying guarantees and long-term steady performance," says FDM director Mr Eddie Hobbs.

Younger investors, with more than 20 years to retirement, should seriously consider an investment strategy which concentrates purely on equity funds rather than managed funds which typically have equity holdings of between 60 and 80 per cent.

The changes to pensions legislation introduced in the 1999 Finance Act - which free the self-employed and proprietary directors from having to purchase an annuity upon retirement - are also likely to lead to a greater emphasis on investment in equity and properties over the long term.

FDM also believes that with-profit funds provide better relative value than unit-linked managed funds because they provide guarantees.

Although unit-linked funds have closed the performance gap on with-profits returns in recent years, most are still not outperforming by the 2 per cent or so necessary to compensate for the lack of a guarantee.