Investment Themes

The DC Future Book

Edition nine – The DC Future Book 2023

This year’s edition continues to highlight the impact of higher inflation on pension savers. For those in the accumulation phase, the increasing cost of living may reduce their ability to save, which could lead to decreased contribution levels. At the same time, saving pot values will be eroded if investment returns do not keep pace with inflation.

It is positive to see the number of people saving for a pension increase, with 10.9 million employees automatically enrolled – an increase of 200,000 over the past 12 months.1 However, there are an equal number of employees that are ineligible for automatic enrolment, leading to a potential gap in pension provision for a large portion of the population if not addressed.

We know that greater pension participation at younger ages has a positive impact on retirement outcomes, particularly as contributions made in the early stages of working life have longer to grow. It is pleasing to see automatic enrolment has significantly boosted pension participation among young people, with 85% of those aged between 22 and 29 currently participating, a strong rise from 24% in 2012, and the largest increase among any age group.2 But as the report points out, despite higher participation rates, minimum contribution levels are not enough to deliver adequate retirement outcomes for future generations.

In Chapter 4 we explore how decumulation decisions will differ for future DC savers. Most future retirees will be wholly dependent on DC savings to provide an income in retirement, supplemented by their state pension. Current contribution rates, however, have stagnated, and if they do not rise, future retirees face difficult decisions between adequacy and sustainability. Furthermore, longer life expectancy means savings will have to be spread across a longer retirement period, and lower levels of home ownership will likely lead to higher housing costs in retirement, adding further challenges to good retirement outcomes for current workers. These drivers may delay retirement as working lives are extended.

We strongly encourage the pensions industry to adapt products and services to support individuals more effectively within the changing pensions landscape. Introducing more hybrid products that provide elements of both security and flexibility within one single wrapper would better support young savers.

Alongside a better offering in the future, it is imperative that the industry supports the social need for more education on pensions and retirement planning, highlighting the importance of increasing contribution rates. In particular, the provision of financial education in schools to ensure children and young people learn the tools and behaviours required to effectively manage their personal finances throughout their life.

We must all work together to consider how we can help current and future retirees look forward to a comfortable retirement by delivering the relevant education, products and frameworks to provide more people the prospect of a good outcome.

1TPR (2023) Automatic enrolment declaration of compliance report

2 DWP (2022) Workplace pension participation and savings trends of eligible employees: 2009 to 2021

Previous reports


2022 The DC Future Book


2021 The DC Future Book


2020 The DC Future Book


2019 The DC Future Book


2018 The DC Future Book


2017 The DC Future Book


2016 The DC Future Book


2015 The DC Future Book

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