DC Master Trust member outcomes see big improvement since 2022

Outcomes for members of DC Master Trusts have significantly improved since the period of gilt market volatility in 2022, says Hymans Robertson in its latest Master Trust Insights Report published today. Since the beginning of 2023, Master Trust members across all life stages have benefited from more favourable market conditions, amidst falling inflation, higher than expected global growth forecasts, and falling yields.

The report from the leading pensions and financial services consultancy looks at three sample members, and how their retirement outcomes have changed over the last five years.

The analysis firstly looks at the example of someone who is 30 years from retirement, who is mostly concerned about making ends meet and does not see their pension as a priority. The analysis shows that they would be in a good position to recover from any future market downturns, and that they should maintain, if not maximise, their pension contributions.

Secondly, the paper examines the retirement outcomes of a member who is ten years from retirement, has a reasonably sized fund and is starting to think about their retirement choices. Members like this, who were negatively impacted by the volatility of markets in 2022, have since experienced a recovery in their expected retirement outcomes, benefitting from strong returns in both equity markets and falling yields, which support positive returns for bonds.

Finally, the report sets out the retirement outcomes of someone who is part of the “Baby Boomer” generation and plans to retire in five years. Their fund value has largely recovered from the market volatility of 2022, and their investment strategy should be focussed on defensive asset allocation to provide them with more certainty in retirement.

Commenting on the improvements in member outcomes since the beginning of 2023, Shabna Islam, Head of DC Provider Relations at Hymans Robertson, says:

“Our analysis tells a positive story for savers at all stages of the Master Trust glide path. Falling inflation, an unexpected boost in global growth forecasts, and falling yields have contributed to the recovery of bond markets after their slump in 2022.

“Equity markets have also provided particularly strong returns, as the technology sector continues to be the driving force in global markets. Younger members see an exaggerated benefit from this growth – mainly driven by stocks associated with AI – given the higher equity allocation of their funds.

“The better picture, for all savers, is just the start of the narrative set out in our Master Trust Insights Report. From this footing, better outcomes in retirement can be realised, providing members with a true ‘to and through’ investment solution to provide for their retirement.”