Defined contribution (DC) pension providers are increasingly retaining growth assets for longer despite heightened market volatility, according to new research from Isio.

The advisory firm's latest analysis of the investment performance and asset allocation of 14 major UK DC master trust providers found that they increasingly favoured growth-focused strategies and were moving away from traditional capital preservation approaches in retirement.

The research showed that global equities declined in the first quarter of 2026 amid heightened geopolitical uncertainty and rising energy prices, with US equities particularly weak, as technology stocks retraced after strong performance in 2025.

Emerging markets proved more resilient, while UK equities delivered positive returns, supported by higher oil prices and a weaker pound.

However, rising inflation expectations pushed gilt yields higher, weighing on conventional bonds, while credit markets also generated negative returns.

Despite the challenging backdrop, Isio said providers had largely maintained a long-term investment approach rather than reacting to short-term market movements.

According to the research, growth-phase strategies delivered a wide range of returns during the quarter, from gains of 0.9 per cent to losses of 4.5 per cent, reflecting differences in equity exposure, regional allocations, and overall strategy design.

Yet, three-year annualised returns remained significantly stronger, ranging from 9.2 per cent to 17.4 per cent across providers.

Isio noted that recent changes to many strategies mean historic performance should be interpreted with caution.

The firm also suggested that growing allocations to private markets and broader diversification strategies could lead to greater differentiation between providers over time.

Meanwhile, the research found that retirement strategies continue to evolve, with providers increasingly designing solutions around longer retirement horizons and the growing use of drawdown, rather than focusing solely on annuity purchases or capital preservation.

As a result, providers are retaining exposure to growth assets for longer and increasing diversification into fixed income and alternative credit assets to support sustainable retirement income.

Commenting on the findings, Isio head of DC master trust research, Mark Powley, said: "Q1 was a reminder that periods of volatility are a normal part of long-term investing, particularly following a sustained period of strong market performance.

"What’s notable is that providers have generally maintained a disciplined long-term approach rather than reacting to short-term market movements.

"We continue to see strategies evolving to reflect changing retirement behaviours and the growing recognition that more members are likely to remain invested for longer into retirement.

"That is leading providers to retain growth assets for longer, while also broadening diversification to help manage downside risk more effectively."

Powley added that the growing variation in performance among providers underscores the increasing importance of strategic decision-making in default investment arrangements.

"As private market allocations continue to develop and retirement solutions evolve further, we expect differentiation between strategies to become even more pronounced over time."

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