Outcomes for members of DC master trusts have significantly improved since the period of gilt market volatility in 2022, according to new research from Hymans Robertson.
Its latest Master Trust Insights Report shows that members across all life stages have benefited from more favourable market conditions, amid falling inflation, higher than expected global growth forecasts, and falling yields.
The report looks at three sample members, 30 years, 10 yeas and five years from retirement, and how their retirement outcomes have changed over the last five years.
In the first cases the analysis looks at an individual who does not prioritise pension savings. The Hymans analysis shows these individuals remains a good position to recover from any future market downturns, and that they should maintain, if not maximise, their pension contributions.
The second analysis concerns someone 10 years from retirement who has a reasonably sized fund and is starting to think about their retirement choices. Hymans analysis says members like this, who were negatively impacted by the volatility of markets in 2022, have subsequently experienced a recovery in expected retirement outcomes, benefitting from strong returns in both equity markets and falling yields, which support positive returns for bonds.
Finally, the report sets out the retirement outcomes of someone who is part of the baby boomer generation and plans to retire in five years. The analysis shows fund values have largely recovered from the market volatility of 2022, and their investment strategy should be focused on defensive asset allocation to provide them with more certainty in retirement.
Hymans Robertson head of DC provider relation Shabna Islam says:“Our analysis tells a positive story for savers at all stages of the master trust glide path. Falling inflation, an unexpected boost in global growth forecasts, and falling yields have contributed to the recovery of bond markets after their slump in 2022.
“Equity markets have also provided particularly strong returns, as the technology sector continues to be the driving force in global markets. Younger members see an exaggerated benefit from this growth – mainly driven by stocks associated with AI – given the higher equity allocation of their funds.
“The better picture, for all savers, is just the start of the narrative set out in our Master Trust Insights Report. From this footing, better outcomes in retirement can be realised, providing members with a true ‘to and through’ investment solution to provide for their retirement.”
