DC savers are expected to see an increase in future living standards, despite wider geopolitical volatility, according to Aon’s pension tracker for 2025.
Figures relating to the final quarter of last year, show an overall improvement for savers at 30, 40 and 50 years of age. However while this data covers a period of market volatility and ongoing political uncertainty, it does not include the more severe turbulence that has followed the attack by the US and Israel on Iran and subsequent conflict in the Middle East in recent months.
Aon’s tracker shows that over 2025 DC pension schemes fared well, despite ongoing volatility and inflation, with member outcomes increasing. As a result members could expect to have a higher income in retirement than was projected at the start of 2025.
Expected retirement outcomes were also supported by a relatively small increase in the Retirement Living Standards during the year which was more than offset, at the minimum and moderate target levels, by the April increase in the State Pension.
However Aon says geopolitical events in 2026 and uncertainty around energy supplies means the spectre of inflation is looming large over the global economy once again.
It adds that this T has the potential to erode the real value of retirement incomes for pension savers. It says this amay lead to a reduction in the amount people can afford to save for the future.
It further adds that Pensions UK is expected to release revised Retirement Living Standards during 2026, which could alter how retirement expectations for many savers. It says that if earlier tracker updates are anything to go by, and as seen in 2022 and 2023, climbing the ladder of positive returns can quickly be undone when an increase to the Retirement Living Standards effectively raises the bar for savers. Members may feel themselves sliding back down towards a lower standard of living as a result.
Aon partner and head of UK retirement policy Matthew Arends says: “While everyone’s expectations of an ‘adequate’ retirement income will differ, any change to the Retirement Living Standards, particularly an increase, will require DC savers to reassess their positions and consider whether additional savings, or working longer, may be required to achieve the living standard they want in retirement.
“The recent jump in oil and gas prices is driving another surge in inflation which will add more pressure to household budgets. Understandably, people may find it difficult to maintain or even increase pensions savings against this backdrop. When coupled with the expected increase in the Retirement Living Standards, many savers may see a comfortable retirement slipping further out of view.”
The increase in the Aon UK DC Pension Tracker over the final quarter of 2025 was primarily driven by positive benchmark performance over the period. On an individual saver basis, movements over the quarter were positive at all three sample ages.
The youngest saver saw an increase of around £1,000 p.a. (2.7 per cent) driven by positive actual investment performance over the quarter and an increase in expected future investment return assumptions both pre- and post-retirement.
The 40-year-old saver saw the largest increase of around £1,050 p.a. (or 2.6 per cent) in their expected retirement income. Again, this was driven by positive actual investment performance over the quarter and a rise in post-retirement expected future returns. These were offset to a degree by a reduction in the expected future return pre-retirement.
The typical 50-year-old saver used in these calculations saw an increase of around £500 p.a. (or 1.3 per cent) in their expected retirement income. Due to this saver’s larger existing funds, strong investment performance gave the most benefit, particularly in equity markets, over the quarter. However, this was partially offset by decreases in expected future return assumptions pre- and post-retirement.
Aon adds that the oldest saver’s income was broadly flat (an increase of around £50 p.a. or 2.6 per cent). This was as a result of positive investment return over the quarter being almost entirely offset by a reduction in expected future returns pre- and post-retirement.
Overall, the oldest saver is expected to be the worst-off in retirement, albeit with a retirement income of around 150 per cent of the ‘minimum’ Retirement Living Standard. This excludes any defined benefit pension benefits they may have but which are not included in this projection.
The Tracker rose from 71.3 to 73.4 over the last quarter of 2025, driven predominantly by positive benchmark investment returns across major asset classes.
This has resulted in an increase in expected retirement income for all savers, though younger savers benefited the most (in percentage terms) as they also benefit from higher future return assumptions post-retirement, unlike older members who are closer to retirement.