Two-thirds of professionals running a defined contribution scheme do not know how much a typical member can expect at retirement, a new survey has revealed, and only 29% monitor what their investment performance means in aggregate for a member in the default option.  

As stock markets are sliding, DC members in the accumulation phase will be most impacted, potentially facing a lower quality of life in retirement if they do not manage to ride out the current volatility.  

Despite – or because – individuals being those bearing the effect of DC scheme performance and contribution levels, most pension funds do not monitor either how much a typical member will receive at retirement, or what the default fund’s performance means for members, focussing on investment benchmarks instead, according to Aon’s latest DC pension schemes survey of 214 schemes with combined assets of about £60bn and more than 1m members. At the same time, most schemes maintain they prioritise providing good value.  

Aon associate partner Steven Leigh said understanding the connection between good value and good outcomes it was “crucial”.  

He added: “It’s therefore disappointing that so many do not have a clear view of the expected outcomes for their members. At 65%, this level is similar to our research in 2022 and shows a distinct lack of progress in understanding this fundamental element of workplace pensions.”   

Of those that do know more about how much members receive, 22% say they consider DC outcomes based on the Pensions and Lifetime Savings Association’s Retirement Living Standards.  

Ben Roe, senior partner and head of DC consulting at Aon, agreed it was a concern that nearly two-thirds of schemes do not know what their scheme’s approach means for the expected pension outcomes of members.  

   
“With the amount of continual change in the UK pension landscape, it can be challenging to prioritise the ‘important’ from the ‘urgent’, and to move from ensuring regulatory boxes are ticked, to focussing on activity that makes the most improvement to outcomes for DC savers. That’s why it’s encouraging to see the continued prioritisation of understanding and improving member outcomes,” Roe said, noting that he has seen schemes take action on outcomes.  

He welcomed that retirement adequacy is one of the themes of the new government’s pension review.  

Adequacy seems relatively low on the list of priorities for employers; the median default contribution rate remains at around 6% from the company and 4% from the employee, although this conceals a wide range across all schemes.   

Is it possible to provide value without monitoring outcomes?