By Richard Birkin, Head of DC Pensions at Isio
2025 is shaping up to be the biggest year of change for DC pensions since the introduction of auto-enrolment. Consolidation will dominate, with own-trust schemes continuing the transition to master trusts as the master trusts strive to become the so-called megafunds.
At the same time, dashboards and authorised provider lists will accelerate efforts to address the small pot problem, enabling faster and smoother transitions. The goal is clear – fewer, larger, and more efficient schemes hopefully delivering real value for members.
Retirement products and accompanying support is finally taking centre stage. Providers are positioning themselves for the launch of smarter, more member friendly decumulation strategies, default retirement solutions, and enhanced member support – all well overdue developments. The shift is driven by the need to retain assets whilst hopefully providing members with meaningful support and increased retirement income. Legislative backing for default retirement strategies would be a welcome push to make this a reality.
Value for money will move beyond low costs and focus on what really matters, with investment in private markets and alternatives and more diverse and resilient portfolios. 2025 will be about shifting the narrative from cost to value – ensuring members get more from their savings.
Technology will play a game-changing role in 2025. The use of AI and the development of more personalised and relevant support tools will improve understanding. The advice gap remains a challenge, but digital innovation and better regulation can help bridge this, empowering members to make informed decisions.
But the elephant in the room remains pension adequacy. Average contribution levels, especially for ‘middle-band’ earners, simply aren’t enough to produce desired income replacement levels. Many in this cohort will not have a DB pension, and more innovative and focused contribution structures may emerge to try to better support this particular group.
2025 isn’t just a year of change – it’s a year of opportunity to reshape DC pensions. Let’s focus on, and finally see through, some key initiatives and deliver a system that works better for members.
