More than seven out of 10 DC providers saw their default growth strategy outperform a passive portfolio in 2025 — up from just 19 per cent the year.
These figures were contained in Howden’s latest DC Default report, which looks at the annual returns on default strategies for both growth and ‘at retirement’ portfolios.
The report showed that there was strong investment performance in 2025, with 71 per cent of providers delivering higher returns than a passively managed portfolio with the same mix of return-seeking and defensive assets.
There were strong returns across the board, with all providers included in this report delivering good returns for member and outperforming Howden’s target of beating inflation plus 4 per cent over the year.
The strongest performer was LifeSight which delivered the highest return for members in both the growth and ‘at-retirement’ stage. Over 2025 it delivered returns of 20.6 per cent for younger savers and 12.7 per cent for those at retirement.
In total this report covers 28 default arrangements with a total £500bn under investment and over 30 million members. This covers master trust, contract-based providers and bundled own trust schemes.
During the growth phase there was a 13.1 per cent gap between the higher and lower performing default strategy. This narrowed for older savers, with just a 5.4 per cent gap between top and bottom performers at retirement.
Howden points out that volatility was higher in the growth phase in 2025 than in 2024 – with one strategy seeing 14.2 per cent volatility, compared to highs of 8.7 per cent in 2024. It says volatility changes were more muted year-on-year in the retirement phase, suggesting a return to favour for diversification.
The report also looks at the sustainability objectives and asset allocation of these default strategies. It points out that after several years of large increases in allocations to funds with emission-reduction targets, that progress has slowed.
In the growth phase, the average allocation to these funds increased from 73 per cent to 77 per cent over the year. This 4 percentage point increase compares to a 38 per cent increase since this metric was first included in 2021.
In the ‘at retirement’ phase, there has been no change in the average allocation to these funds over 2025, but a 25 percentage point increase since 2021.
Despite the noise, private markets allocations remain limited in existing strategies, and their impact on relative returns remains muted. The average net exposure to private markets across all growth portfolios remains at around 4 per cent, which includes private equity, private debt, property, and infrastructure.
Howden says that allocation are lower in the‘at retirement’ portfolios, standing at around 3 per cent.
It points out that while the average target allocation for private markets is 10 per cent, some schemes are targeting over 25 per cent in the growth phase. Overall, there are four schemes targeting 20 per cent plus, and sixteen targeting more than 10 per cent. .
Howden head of DC default research Alex Toney says: “The DC market celebrated a good year in 2025 – all members using these flagship default strategies, be they early in their careers or coming up to retirement, saw strong returns.
Most schemes passed our passive portfolio test, aided by North American equities delivering weaker returns.
“But the real test starts now. With less than five years until the Mansion House deadline, we expect to see a rapid shift in strategic positioning. Private market advocates promise enhanced returns, diversification, and access to long‑term growth themes, yet the evidence is clear; manager selection and skill drive the majority of outcomes.
“2026 is the year for DC providers to invest in themselves to ensure they have the experience and governance structures needed to consistently make the right calls, in complex asset classes like private markets, impactful strategies like currency hedging, and tumultuous markets like the AI tech market.
“Ultimately, the race is on to deliver the best member outcomes as DC market competitiveness reaches new heights.”
