Members in master trust Cushon that are 10 and five years from retirement have the best projected retirement outcome by pot size, while those 30 years from retirement have the largest pots if they are with SEI, a new report comparing DC master trust and group personal pension performance suggests. Larger providers fare less well in the comparison.

The latest DC Provider Report by Hymans Robertson compares best estimate outcomes, sitting within a range, assuming a starting pot of £50,000 at 30 years from retirement, earning £30,000 a year while contributing 10%. In the consolidation phase 10 years from retirement, the assumption is of a member with a £150,000 pot, earnings of £50,000 and a 10% contribution. For the member five years from retirement, the report assumes a £200,000 pot, earnings of £55,000 and contributions of 10%.

30 years from retirement

10 years from retirement

Five years from retirement

Cushon is one of the smaller master trusts in the market, but scale – despite the government’s stated views – has not resulted in higher performance among DC providers to date, according to Hymans. The Department for Work and Pensions came to a similar conclusion in analysis accompanying the DC consultation on size requirements last year but chose to propose a minimum size of £25bn despite this.

Shabna Islam, head of DC provider relations at Hymans, said the government is clear that it believes taking advantage of scale is the main source of delivering better value, stronger governance and ultimately better long-term outcomes for savers.

“Looking back over the last decade, scale has not necessarily always led to better investment performance, with many of the larger providers erring on the side of caution. However, it was the smaller providers, often pursuing a higher growth-oriented strategy, who benefitted from stronger returns,” she said. 

In general, since 2023, members at all stages of their retirement journey have benefitted from more favourable market conditions and better outcomes, she noted, but things are about to change in the investment mix, for better or for worse. 

“Looking ahead, we anticipate significant market developments with the introduction of private market assets and greater divergence with higher private market allocations. Providers will be competing to showcase their capabilities within the market, and deliver the best outcomes for their members, yet it is clear that the success rate will vary," Islam said.

With providers' current asset mix, there are several reasons for the lack of correlation between size and performance, the report finds. It argues that “a notable driving factor” was that many of the larger providers adopted more balanced investment strategies in the wake of auto-enrolment, harbouring concerns that members would opt out if assets had high volatility.

This theory has been thoroughly debunked. “Multiple economic and geo-political events have tested this thesis over the past five years, ultimately showing that members are able to withstand market volatility (whether knowingly or unknowingly)  in pursuit of higher returns,” Hymans concluded. 

However, it cautioned that “relying solely on backward-looking measures fails to reflect the innovation that has taken place” in the past five years.