DC trustees expected to support savers and monitor investments
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Stock markets plummeted in the wake of the US announcing high tariffs on imports, reducing the retirement pots of many workers in the UK. DC trustees need to think about how to communicate with them at this time of uncertainty, says the Pensions Regulator, and keep an eye on governance and investment structures.
DC default funds are largely structured as ‘lifestyle options’, where most if not all of the contributions are invested in higher risk assets – usually equities – during the accumulation phase, only to be partially derisked in the 10 or 15 years before a person’s the chosen retirement date.
A high exposure to equities has provided handsome gains for DC members during recent stock market rallies. The short, sharp shock of March 2020 aside, April 2025 is the first time since the start of auto-enrolment that DC savers are exposed to what could become a prolonged downturn, with recent news of a 90-day pause on tariffs only leading to a partial stock market recovery.
DC default funds are largely structured as ‘lifestyle options’, where most if not all of the contributions are invested in higher risk assets – usually equities – during the accumulation phase, only to be partially derisked in the 10 or 15 years before a person’s the chosen retirement date.
A high exposure to equities has provided handsome gains for DC members during recent stock market rallies. The short, sharp shock of March 2020 aside, April 2025 is the first time since the start of auto-enrolment that DC savers are exposed to what could become a prolonged downturn, with recent news of a 90-day pause on tariffs only leading to a partial stock market recovery.
TPR: DC trustees should communicate with savers and check investment structures
There is about £1tn in DC, including £560bn in DC workplace schemes, the Pensions Policy Institute estimated last September. Of this, the PPI says about 56% is held in equities, and across all £3tn UK pensions, it thinks a third is in equities, though with share values falling, the proportions may well have changed now.
With the median DC pension pot at £33,500 as far back as 2018–20 according to the Institute for Fiscal Studies, savers have begun to take notice of their pots. Headlines of stock market crashes are doing nothing to improve confidence and could scare DC members into changing investments or stopping contributions, with many feeling they face a precarious retirement outlook in any case.
The Pensions Regulator says it is up to trustees to ensure DC savers are not spooked. “Pensions are a long-term investment. For many defined contribution savers, any losses caused by short-term market volatility can be recovered over time. But, for those nearing retirement, the impact could be more significant,” a spokesperson said.
A downturn in bond markets could leave those close to their retirement date – whose lifestyling options have moved much of their assets into bonds in the belief this would be less volatile – exposed. This was the case for people who were holding bonds during the 2022 gilts market panic that followed the Truss ‘mini Budget’, ending up with much smaller pots as a result and little time to make up the losses before accessing their money to retire.
“We expect trustees to communicate appropriately with savers about their options, and to encourage them to seek appropriate advice and signpost free impartial guidance from MoneyHelper,” the spokesperson added.
Trustees should also ensure their governance and investment structures are appropriate and they are regularly reviewing investment performance, TPR said.
“We continue to monitor the situation in financial markets closely to assess the impact on schemes and sponsoring employers,” the spokesperson added.
Will there be further upheaval?
The current pause in high tariffs is unlikely to be the end of the market volatility, said Chris Inman, a DC investment partner at consultancy Aon.
DC members should remember to focus on the long term, knowing that market ups and downs “while uncomfortable, are a normal part of investing” and for those with time left, “it is... well worth remembering that as markets recover, pension savers who are making regular contributions will be invested at more attractive prices”.
However, for DC savers who are close to retirement and planning on accessing some or all their pension fund, it is important to consider the potential short-term impact of market volatility on their plans, he agreed.
“Before taking action, it’s likely to be beneficial for them to speak to a financial adviser for guidance that is specific to their situation,” Inman advised.
One bright spot is that diversification through short-dated government bonds has been beneficial, he remarked.
“Values have generally held steady or increased during the equity slump of the past few days. We haven’t seen this negative correlation between bond and equity price movements – and to this extent – since the Covid-19 crisis-hit markets,” Inman noted.
He stressed the need to be alert to the threat of scammers preying on concerns about falling pension values by trying to persuade people to transfer their savings, adding: “Whatever the circumstances, the key message to savers is not to rush into decisions affecting their long-term savings, based on short-term market volatility. And, if in doubt, seek professional advice.”
Could the current market upheaval change DC members’ attitude to pensions?
DC members should remember to focus on the long term, knowing that market ups and downs “while uncomfortable, are a normal part of investing” and for those with time left, “it is... well worth remembering that as markets recover, pension savers who are making regular contributions will be invested at more attractive prices”.
However, for DC savers who are close to retirement and planning on accessing some or all their pension fund, it is important to consider the potential short-term impact of market volatility on their plans, he agreed.
“Before taking action, it’s likely to be beneficial for them to speak to a financial adviser for guidance that is specific to their situation,” Inman advised.
One bright spot is that diversification through short-dated government bonds has been beneficial, he remarked.
“Values have generally held steady or increased during the equity slump of the past few days. We haven’t seen this negative correlation between bond and equity price movements – and to this extent – since the Covid-19 crisis-hit markets,” Inman noted.
He stressed the need to be alert to the threat of scammers preying on concerns about falling pension values by trying to persuade people to transfer their savings, adding: “Whatever the circumstances, the key message to savers is not to rush into decisions affecting their long-term savings, based on short-term market volatility. And, if in doubt, seek professional advice.”
Could the current market upheaval change DC members’ attitude to pensions?
