Defined contribution (DC) master trust outcomes for members have improved "significantly" since the period of gilt market volatility seen in 2022, Hymans Robertson's latest Master Trust Insights report has revealed.

The report covered three sample members, showing that, 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.

According to the analysis, those in the growth phase (around 30 years from retirement) would have seen positive, but varying, levels of performance over the past three years, with otherwise similar members facing differences in return of up to 8 per cent per annum.

In addition to this, the report found that although members in the consolidation phase (around ten years from retirement) were negatively impacted by the volatility of markets in 2022, they have since experienced a recovery in their expected outcomes, benefiting from strong returns in both equity markets and falling yields, which support positive returns for bonds.

Indeed, Hymans Robertson estimated that most providers have returned in the region of 1-8 per cent per annum for consolidation phase members over the past three years.

The research showed that the expected retirement outcomes of those who are part of the “Baby Boomer” generation have also improved following the 2022 market volatility, as their fund value has now largely recovered.

However, the difference in investment strategy were again evident, as Hymans Robertson found that providers return ranged from 0-7 per cent per annum for those in the pre-retirement phase.

Whilst Hymans Robertson suggested that investment strategy for this group should be focussed on defensive asset allocation to provide them with more certainty in retirement, it acknowledged that, as DC pot sizes become larger over time, there will be a growing requirement for pre-retirement strategies with higher levels of risk as members opt for drawdown at retirement.

Commenting on the recent improvements in member outcomes, Hymans Robertson head of DC provider relations, Shabna Islam, said: “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.”

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