What did 2025 bring for DC pensions and what’s in store for 2026?

As we head into the festive period to spend time with family and friends (and maybe a glass of mulled wine or two), it’s also a chance to reflect on what has been another positive year for DC and UK pensions. Here’s what stood out for me over the last year and what 2026 may have in store.

Regulation set the tone

This year, we finally saw the conclusion of the Pensions Investment Review and are now awaiting the finalisation of the Pension Schemes Bill. The themes are well known, covering the emerging value-for-money framework and the government’s agenda, which makes it clear that cost alone is no longer a defensible definition of value. Trustees and sponsors are being pushed towards a world where net returns, investment quality and member experience will be measured, compared and ultimately judged. That should be positive, although I’m keen to see how forward-looking measures will be integrated rather than relying purely on backward-looking ones. Discussions with regulators will resume in January.

And of course, we have the government’s ultimate objective of driving scale, which is already causing significant recalibration across the industry. News of new entrants to the master trust market , mergers, takeovers, plus the continued consolidation from single employer schemes – every corner of the DC market is affected. I wouldn’t be surprised to see the pensions market consolidate to a single-digit number of providers within a matter of years.

Markets delivered more than anyone bargained for

I very much doubt anyone predicted the level of returns we have seen over the course of 2025 – making it yet another very positive year for members. Global equity markets delivered returns of c.15% in 2025, which is great news for member savings, even if it raises further concerns about bubbles.

Looking back over the last decade, it is incredible to see just how much strong investment returns have improved member retirement pots, typically averaging double-digit annual returns.

Take an average member on the minimum 8% contribution rate (from the first pound). Using the average performance of all master trust default strategies over that period, their pot today would be around a third higher than originally projected over the same timeframe. And that is even with Brexit, Covid, the energy crisis, the war in Ukraine and the LDI crisis.

Put another way, compared to statutory assumptions, the improvement in pot size is equivalent to having paid a 12% contribution rate (rather than 8%) over the same period. That is an incredible outcome for members (and has been even better for those in higher-performing arrangements).

Mansion House Accord and private market investments

The Mansion House Accord saw a second agreement between the UK government and pension providers, this time to allocate at least 10% of default DC strategies to private markets by 2030, half of which must be invested in the UK. Our current analysis of these commitments suggests there will be a minimum of £15bn invested productively in the UK by 2030, based on current default strategy designs and AUM.

If we include expected market growth, the impact of consolidation and the latest iterations of investment strategy design, this figure could reach the £50bn of investment in the UK that the government originally announced, as part of an overall £150-£200bn allocation to private markets. However, that level of progress will require a much greater level of support from trustees and sponsors – and a stronger pipeline of investments. I’m pleased to be working closely with industry groups such as the BVCA to explore exciting initiatives such as NOVA that aim to support greater UK investment.

What does 2026 hold?

Next year won’t bring any slowdown in the pace of change. As the Pension Schemes Bill is finalised, and with expected progress on both VFM and performance fees in contract-based arrangements, attention is turning to the final piece of the jigsaw: default income.

Employers already default employees into schemes with default contribution rates and default investment strategies. In 2026, we should finally see the rules for post-retirement default income solutions too. While DC is all about flexibility, the reward for most members is delivered through these defaults. We’ve already seen excellent examples of schemes where members have engaged well with signposted post-retirement solutions, so it’s encouraging to see this progress extend across all schemes in future years.

Collective DC continues to gain momentum

Since the launch of the Royal Mail CDC scheme last year, interest has grown and work is progressing across the market. However, alongside the clear enthusiasm and ambition, there are still some important concerns to consider. It is worth taking a prudent, balanced view of this development – especially given the substantial progress already made with DC schemes. This also gives me the opportunity to signpost the objective comparison report we produced back in October (well worth a read).

We are edging ever closer to the launch of the Pensions Dashboard. From what I have seen so far, it is a very impressive offering and has the potential to be a real game-changer for UK pension savers. I am sure there are many, like me, already wondering why we did not build and launch it sooner.

Watch this space for our 2026 predictions, which we expect to release early in the New Year.