The gap between the best and worst performing defined contribution (DC) workplace pension providers in the accumulation phase was 14.4 per cent in 2024, up from 9.7 per cent in 2023, research by Barnett Waddingham has revealed.

The consultancy’s annual pension provider review found that the strongest performer over the year returned 23.3 per cent in the accumulation phase, while the weakest returned 8.9 per cent.

In the decumulation phase, the performance gap was 5.3 per cent in 2024, falling from 8.1 per cent in 2023.

Meanwhile, the joint strongest performers returned 8.8 per cent, while the weakest returned 3.6 per cent.

Barnett Waddingham noted that pension providers who invested more heavily in equities saw better performance in 2024.

This was particularly true for those who reduced their focus on the UK market, which had a return of 9 per cent and opted for the US market instead, which saw a return of 21 per cent.

The consultancy also said that credit underperformed equity in 2024, but providers who chose shorter-term and riskier credit, such as high-yield debt, saw good returns.

Barnett Waddingham pointed out that currency hedging had a relatively small impact on returns in 2024, offering some stability.

However, the firm said this masked “significant” currency volatility, which continued in 2025.

Despite the gap between the strongest and weakest performances, all providers outperformed a typical inflation-plus target for the accumulation phase in 2024, while in the decumulation phase, 90 per cent of providers met their target.

However, the firm said it was important to assess DC investment strategies over the long term, as members will be invested for 40+ years.

The research found that over the past five years, 60 per cent of providers achieved a typical inflation-plus target in the accumulation phase and no provider met the target in the decumulation phase.

Barnett Waddingham said that now inflation has fallen closer to target, it will be monitoring how long it takes providers to improve their long-term performance.

Previous research from Barnett Waddingham highlighted a growing consensus between providers on the right strategic asset allocation, due to herding in the accumulation phase.

Given this, the firm said it was surprising to see a bigger difference between the strongest and weakest performers in the accumulation phase in 2024.

The consultancy said that despite the fact that there were signs of herding in the asset classes being used, there remains “significant” differences in style, for example, regional exposures, and use of factor-based investment, when looking closer at the detail.

Barnett Waddingham principal, Hugo Gravell, said that as investment strategies become more sophisticated, it’s “crucial” for trustees and sponsors to ensure their governance frameworks evolve to assess value effectively.

“While it’s natural to focus on leader boards, sometimes the best course of action is to stay the course rather than react hastily,” Gravell continued.

“Here, it's important to take a structured approach: first, focus on outcomes – ensuring performance aligns with inflation and member needs.

“Second, test whether the strategy is truly right for members by assessing risk profiles and asset allocation.”

He added that trustees and sponsors should also ensure any newfound complexity adds real value, as he pointed out that 18 per cent of providers outperformed a fully passive version of their strategy in 2024's accumulation phase, and 27 per cent at decumulation.

“Understanding performance drivers is getting harder and will be key to making informed, forward-looking strategic decisions,” he stated.

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