Defined contribution (DC) pension scheme members have seen further improvements in their expected retirement incomes in 2025, according to Hymans Robertson.
This is according to the analysis of its latest DC Provider Report which covers default investment strategies in master trusts and GPPs. It comes amid the Pensions Investment Review, the 2025 Pensions Bill and the revival of the Pensions Commission.
The report’s Member Outcomes Tracker shows that over the past five years, members 30 years from retirement have seen an 18 per cent rise in expected fund value, those 10 years away a 6 per cent increase and those 5 years away a 2.5 per cent gain. Members earlier in their retirement journey have benefited from strong equity growth, while those nearing retirement have moved into safer investments to protect their savings.
Under the new legislation providers must show that one of their main default arrangements will exceed £25 billion in assets by 2030 or be on track to do so by 2035, with at least £10 billion by 2030. Some are already on target, but over half will need new contributions, client growth, or acquisitions to comply. Scale alone has not guaranteed higher returns, with some smaller, outperforming larger ones.
Hymans warns that a “one-size-fits-all” approach no longer meets members’ needs. It says providers are being encouraged to tailor strategies to people’s retirement timelines and comfort with risk. The report says new scale requirements and ongoing market volatility are expected to increase competition as providers try to deliver better outcomes.
Hymans Robertson head of DC provider relations Shabna Islam says: “The launch of the Pension Schemes Bill, and the new Pensions Commission, marked a huge turning point for workplace pensions. They highlight the attention on pensions from the current government, as part of a wider movement towards long-term value, particularly for DC savers. The government is clear that they believe taking advantage of scale is the main source of delivering better value, stronger governance and ultimately – and most importantly – better long-term outcomes for savers. We expect more employers to support the shift across the industry from focusing on cost to a movement towards long term value.
“Looking back over the last decade, scale has not necessarily always led to better investment performance with many of the larger providers erring on the side of caution. However, it was the smaller providers, often pursuing a higher growth-oriented strategy, who benefited from stronger returns. Economic and political events over the last few years have shown that members can withstand market volatility in pursuit of higher returns.
“In general, since 2023, members at all stages of their retirement journey have benefited from more favourable market conditions and better outcomes. Our report examines what the past five years have meant and how this has particularly helped members closer to retirement. Looking ahead, we anticipate significant market developments with the introduction of private market assets and greater divergence with higher private market allocations. Providers will be competing to showcase their capabilities within the market, and deliver the best outcomes for their members, yet it is clear that the success rate will vary.”
