UK Pension Schemes Lack Clarity on Retirement Goals Amid Reforms

A recent survey by Aon reveals that 73% of employers and trustees are unaware of the expected retirement outcomes for members of their defined contribution (DC) pension schemes. This finding comes as many schemes face significant regulatory changes, with Aon warning that a lack of clarity on desired outcomes could hinder effective planning and adaptation.

The 2026 DC Pension and Financial Wellbeing Survey covered organizations managing £98 billion in DC pension assets and over 1.2 million savers. Aon emphasizes that this period of regulatory change demands a clearer understanding of what pension arrangements are designed to achieve, yet many schemes appear to be falling short in this regard.

Balancing the Value Equation

Steven Leigh, an associate partner at Aon, notes that organizations are trying to balance adequacy, engagement, governance, cost, and retirement outcomes. This challenge is compounded by unprecedented regulatory changes in UK workplace pensions and ongoing financial pressures on individuals. Leigh stresses that value in a DC pension cannot be measured by cost or competitive positioning alone but must be evaluated based on the outcomes it delivers to members.

Priorities and Strategies

Despite the blind spot, 63% of respondents ranked ensuring their DC scheme delivers good value for money among their top priorities. Other priorities include targeted communication and engagement initiatives (56%), increasing contribution levels (30%), and reviewing investment strategies (26%). However, Aon notes a growing trend where competitive positioning is overshadowing retirement outcomes in strategy setting.

53% of respondents focus on aligning benefits with competitors, while only 23% prioritize providing enough for employees to retire at a reasonable age. The proportion focused primarily on retirement outcomes has fallen from 46% in 2022 and 36% in 2024 to 23% this year. Leigh warns that this prioritization of competitive positioning risks detaching pension strategies from their intended purpose.

Consolidation and Structure Changes

The survey also indicates continued consolidation in the DC market, with 51% of respondents considering changes to their pension structure. Of these, 39% expect another structure to deliver better member outcomes, while 32% cite increasing governance and regulatory requirements as the driving force.

Own trust arrangements accounted for 24% of respondents in 2026, compared with more than 50% in 2017, with Aon expecting this figure to fall further.

Adequacy and Investment Performance

Median employer pension contributions remain stable at around 6% of pensionable earnings, despite growing concerns about the adequacy of retirement incomes. Among the minority of respondents with established outcome targets, 22% use the Retirement Living Standards as their main benchmark, while 4% use a replacement salary ratio.

The survey highlights the importance of defaults, with 38% of respondents estimating that fewer than a quarter of their members actively change their contribution rate from the default. Leigh advises employers and trustees to first understand what their existing pension design is likely to deliver before identifying member groups that may be falling behind.

Aon also identifies a missed opportunity in default investment performance. Only 14% of respondents monitor default fund returns against tailored objectives for members at different stages before retirement, compared with 56% who monitor individual component funds against benchmarks. Furthermore, only 28% assess the aggregate returns experienced by members in the default strategy, while 22% are unaware of how default performance is monitored.

Kath Patel, an associate partner at Aon, stresses the importance of well-designed default options, as most DC savers do not make active decisions. She highlights the need for employers and trustees to consider investments more holistically, assessing whether savings rates and default investment returns combined are delivering adequate retirement incomes. Patel emphasizes that investment returns, alongside contributions, are critical drivers of retirement outcomes, making it essential to evaluate default strategies comprehensively.