Almost three-quarters (73 per cent) of UK employers and trustees do not know the expected retirement outcome for a typical lifetime member of their defined contribution (DC) pension scheme, according to Aon.

The firm’s 2026 DC Pension and Financial Wellbeing Survey, Balancing the Value Equation, covered organisations responsible for around £98bn of DC pension assets and more than 1.2 million savers, with Aon warning that many schemes are entering a period of significant regulatory change without a clear understanding of the outcomes their arrangements are designed to achieve.

Aon associate partner, Steven Leigh, said: “This year’s survey results reveal a DC pensions landscape in which organisations are trying to balance the ‘value equation’ of adequacy, engagement, governance, cost and retirement outcomes, while dealing with unprecedented regulatory change in UK workplace pensions and during continued financial pressure for individuals.

“Value in a DC pension cannot be judged by cost or competitive positioning alone. It must ultimately be assessed by the outcomes it helps members achieve.

“However, our study highlights a clear adequacy blind spot. Many organisations are investing in engagement, financial wellbeing and stronger governance but don’t yet know what their pension is likely to deliver for employees.”

Despite this, almost two-thirds (63 per cent) of respondents ranked ensuring their DC scheme delivers good value for money among their top three priorities.

More than half (56 per cent) also prioritised targeted communication and engagement initiatives, while 30 per cent were looking to increase contribution levels and 26 per cent planned to review their investment strategy.

However, Aon found that competitive positioning was increasingly taking precedence over retirement outcomes when schemes set their overall strategy.

Indeed, 53 per cent said their main approach to DC pension provision was to align benefits with competitors, compared with 23 per cent who said their priority was to provide enough for employees to retire at a reasonable age.

The proportion focused primarily on retirement outcomes has fallen from 46 per cent in 2022 and 36 per cent in 2024 to 23 per cent this year.

Leigh added: “Prioritising competitive positioning over retirement outcomes creates a risk that the pension strategy becomes detached from the result it’s designed to deliver.

“Benchmarking has a role, but it’s not a substitute for a clear view of whether employees are building sufficient savings to retire at a reasonable age.”

The research also pointed to continued consolidation in the DC market, with 51 per cent of respondents considering changing their pension structure.

Of those considering a change, 39 per cent cited the expectation that another structure would deliver better member outcomes, while 32 per cent pointed to increasing governance and regulatory requirements.

Own trust arrangements accounted for 24 per cent of respondents in 2026, compared with more than half in 2017, while Aon expects their prevalence to fall further over the next five years.

Meanwhile, 2 per cent expected to adopt a collective defined contribution (CDC) structure within five years, while 14 per cent remained unsure what structure they would use.

Leigh argued that the continued move towards larger multi-employer arrangements reflected employers' desire to outsource more governance and investment responsibilities.

“This year we also saw CDC starting to be considered as a potential future structure," he noted.

“This is a new option in the UK and aims to deliver more stable, better value pension outcomes for savers.”

On adequacy, median employer pension contributions remained broadly unchanged, with the median default employer contribution sitting at around 6 per cent of pensionable earnings.

Aon noted that these rates had remained broadly stable for several years despite the increasing focus on whether DC pensions will provide adequate retirement incomes.

Among the minority of respondents that had established an outcome target, 22 per cent used the Retirement Living Standards as their main benchmark, while 4 per cent used a replacement salary ratio.

The survey also highlighted the importance of defaults, with 38 per cent of respondents estimating that fewer than a quarter of their members had actively changed their contribution rate from the default.

Leigh said employers and trustees should first understand what their existing pension design is likely to deliver, before identifying which member groups may be falling behind and considering how defaults, matching structures and engagement could improve outcomes.

Aon also identified what it described as a missed opportunity around default investment performance.

Just 14 per cent of respondents monitored default fund returns against tailored objectives for members at different stages before retirement, compared with 56 per cent that monitored individual component funds against benchmarks.

Only 28 per cent assessed the aggregate returns experienced by members in the default strategy, while 22 per cent did not know how default performance was monitored.

Aon associate partner, Kath Patel, said: “Most DC savers do not make active decisions - their default investments are doing most of the heavy lifting. This means the choice of a well-designed default option will make a significant difference to member outcomes.

“Alongside contributions, investment returns are one of the most important drivers of retirement outcomes. But our survey found that relatively few organisations, less than a third, are assessing the returns of their default investment strategy in aggregate.

“It is crucial that employers and trustees consider investments more holistically and test two things together: whether savings rates and the default investment returns combined are delivering what members need for a decent income in retirement.”

This article originally appeared in our sister publication Pensions Age.

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