The expected future living standard in retirement provided by defined contribution (DC) savings rose in Q4 of 2024, due to strong benchmark investment returns and an increase in expected return assumptions post-retirement, Aon’s UK DC pension tracker has revealed.

Over the quarter (October to December 2024), the tracker rose from 64.6 to 69.2, with all of Aon’s sample savers seeing their expected retirement income increase.

The youngest saver’s expected income increased by around £770 p.a. (2.2 per cent), while a
50-year-old saver saw the most significant increase of around £2,240 p.a. (or 5.8 per cent) in their expected retirement income.

Overall, the oldest saver is expected to be the worst off in retirement, albeit with a retirement income of around 150 per cent of the ‘minimum’ retirement living standard.

This excludes any defined benefit pension benefits they may have, which are not included in this projection.

The positive returns in Q4 followed 'flat' investment returns in Q3 when the youngest saver’s expected income in retirement decreased by around £170 p.a. (0.5 per cent)

Overall, 2024 marked a year of ‘strong performance’ as the tracker increased from 56.8 to 69.2 - an increase of around 20 per cent.

In monetary terms, members' expected retirement income increased between £2,000 and £6,000 over the year.

However, despite this substantial increase, the tracker has yet to return to the level it reached before the 2023 update to the PLSA living standards.

Aon partner and head of UK retirement policy, Matthew Arends, warned that, given inflation over the year, the expected increase in the Pensions and Lifetime Association (PLSA) retirement living standards when they are next reviewed will cause the Aon UK DC tracker to fall to some degree.

“However, in the absence of any major update to the living standards, this impact may be more muted than in the previous two updates,” he suggested.

“Of course, in reality, DC savers are affected by actual inflation levels in the prices of the goods and services they purchase daily.”

---