The Defined Contribution pensions market must evolve
The UK workplace Defined Contribution (DC) pensions market is at a pivotal moment. With policymakers, regulators and providers increasingly focused on improving saver outcomes and unlocking more long-term investment into the UK economy, there is growing recognition that the market must evolve to do more.
What could DC pension reform look like?
Our new report, developed in partnership with WPI Economics, explores what bold, system-wide reform across regulation, governance, market structure and investment approach could look like, and why it matters. It argues that a stronger future DC pensions market could help deliver better outcomes for savers while supporting broader economic growth.
The Government’s current policy agenda already contains some of the right ingredients, including consolidation, a greater focus on private market investment and a renewed focus on value for money for savers. But meaningful change will require significant ambition across the pensions system, from regulation and governance through to market structure and investment design.
This report sets out an ambitious blueprint for the future pensions market, based on best-in-class target asset allocation for DC default funds, and quantifies the potential benefits for savers and the wider economy.
id
£49,000
more in retirement savings for early career investors - 17% higher than if investment strategies remain unchanged
£115bn
GDP boost and up to 330,000 jobs could be supported by increased infrastructure investment in the UK
15,000
SMEs backed by venture capital and early-stage private equity, helping create up to 32 UK unicorns
Key priorities for a stronger DC pension market
Our research identifies a series of priorities for building a stronger workplace DC pensions market:
- Higher net member value should be the north star: The future regulatory and competitive framework should be guided by the goal of delivering higher net member value. That principle should shape decisions on performance fees, Value for Money (VfM) and how intermediaries operate in the market.
- Members should receive equal protection through a single regulatory approach: A clearer and more consistent framework could help ensure savers benefit from the same level of protection across the market.
- The VFM framework should enable, not hinder, better outcomes: Reforms should support the maximisation of net member value through a single, consistent set of performance metrics and a continuous improvement approach.
- A regulated intermediary sector should add real value: Intermediaries should help employers identify solutions that improve member outcomes and support a more effective secondary market for workplace pensions.
- Trustee capability is critical: Trustees should be drawn from a pool of highly skilled and technically capable individuals who can effectively represent member interests in an increasingly sophisticated market.
- The pensions system should work for savers and the economy: Reform should help schemes access a stronger pipeline of investable assets that can support growth while also delivering strong long-term value for members.
- A universal savings system should underpin the market: A future ready pensions market should support broad participation in long-term saving.
- Sustainable access to savings matters too: Helping savers access their pension savings in a sustainable way should be an important part of a stronger future market.
Why does DC pension reform matter?
The future of the DC pensions market matters not only because of the role it plays in retirement saving, but because of its wider potential to support long-term economic growth. A more effective market could improve retirement outcomes, strengthen confidence in pension saving and help channel capital into productive investment opportunities across the UK.
With the right ambition, the DC pensions market can move beyond minimum standards to play a more powerful role in delivering better retirement outcomes and supporting long-term economic growth across the UK.