Retirement income outcomes for defined contribution (DC) pension scheme members have continued to improve in 2025, despite a backdrop of increasing market volatility, according to analysis from Hymans Robertson.

Its latest DC Provider report assessed how each pension provider is positioned in a market shaped by geopolitical tensions, fluctuating interest rates, an uneven global economic recovery, and significant legislative developments over the past year.

The report found that member outcomes have improved since 2022, particularly for older members who were affected by gilt market volatility.

Since the start of 2023, members across all stages of the glidepath have generally benefited from more favourable market conditions.

Over the past three years, members in the growth phase have seen positive, although varied, performance, as the analysis found that, depending on the provider, otherwise similar members could have experienced differences in returns of up to 8 per cent per annum.

Similiar variations were seen in other stages, as, for members in the consolidation phase, most providers delivered returns of around 2-9 per cent per annum, with one outlier.

However, the report warned that at this stage, while riskier strategies may offer higher expected returns, they could leave members vulnerable to market shocks in their run-up to retirement.

This represents a direct trade-off between maximising potential outcomes and ensuring a risk-controlled approach to retirement date, it added.

In the pre-retirement phase, returns ranged from 1-7 per cent per annum, with the spread reflecting varying allocations to growth assets and differing levels of volatility.

Hymans Robertson said that the levels of variation seen highlighted the importance of "tailored investment strategies" that considered the time horizon and risk tolerance of everyone, especially in times of market volatility.

In general, strategies with a higher equity allocation during this phase delivered stronger outcomes, reflecting equity market gains over the period.

The firm warned that while cautious investment strategies may show relative outperformance during periods of market stress, it’s unlikely such outperformance will persist and lead to better member outcomes over the longer term.

In addition, it noted that lower volatility strategies were unlikely to achieve significantly better downside protection over longer time horizons, and may "drag down" overall performance as a result.

Emphasising this, Hymans Robertson head of DC provider relations, Shabna Islam, claimed that smaller providers, often pursuing higher-growth strategies, have benefited from stronger returns in recent years, adding that economic and political events have demonstrated that members can withstand market volatility in pursuit of higher returns.

Looking ahead, Islam, described the launch of the Pension Schemes Bill and the new Pensions Commission as a “huge turning point” for workplace pensions.

Under the proposed legislation, master trusts and group personal pension (GPP) providers will need to demonstrate that one of their main scale default arrangements either exceeds £25bn in assets by 2030 or is on a plausible path to reaching that threshold by 2035, with at least £10bn by 2030.

The report suggested these changes reflected a "growing belief" from the government that scale is essential to delivering better value, stronger governance, and more resilient long-term outcomes for savers.”

However, Islam warned that recent performance showed scale did not automatically translate into stronger investment returns, with many larger providers taking a more cautious approach.

Therefore, Hymans Robertson concluded that “well-deployed scale” could offer wider benefits, such as viable access to alternative asset classes - including private markets - with the potential to enhance member outcomes.

Islam also predicted “significant market developments” ahead, driven by the introduction of private market assets and growing divergence in allocations.

“Providers will be competing to showcase their capabilities within the market and deliver the best outcomes for their members, yet it is clear that the success rate will vary,” she added.

---