Whilst total defined contribution (DC) pension assets have quadrupled since 2015 to £1.2trn, future growth depends on economic fluctuations, employee and employer behaviour, and government policy, the Pensions Policy Institute (PPI) has said.

The PPI's DC Future Book, which is now in its eleventh year, found that significant progress has been made, as median DC pot sizes have risen steadily to £15,000 in 2024, while total DC assets have quadrupled since 2015, reaching £1.2trn.

However, the report found that issues remain, as balances remain modest for many savers relative to future income needs.

In addition to this, the PPI found that, if current contribution patterns persist, today’s 45–54-year-olds are projected to reach state pension age with smaller DC pots than both older and younger cohorts.

The scope of pension savings was also an area of concern, as the PPI found that the number of workers ineligible for automatic enrolment (AE) has now overtaken those enrolled, with 11.8 million workers excluded due to age or earnings thresholds, compared to 11.3 million employees who had been automatically enrolled.

The data also revealed a strong link between earnings and pension saving behaviour, as it found that lower earners are significantly more likely to contribute only at the AE minimum level, with nearly half (48 per cent) of those earning £10,000–£20,000 per year saving at this level, compared to just 10 per cent of those earning above £70,000.

Similarly, around 74 per cent of low earners contribute 8 per cent or less of their total pay into a pension, falling to only 25 per cent among those with salaries over £70,000.

Engagement efforts could also be improved, as the PPI found that most members remain invested in default funds, which typically shift from 70–80 per cent equities pre-de-risking to around 30 per cent post-de-risking.

And despite a recent push by the government, allocations to alternative assets remain limited, while environmental, social and governance (ESG) priorities remained broadly consistent with previous years.

In addition to this, the PPI found that respondents to the DC Asset Allocation Survey placed greater weight on environmental and governance factors than on social ones.

However, the PPI warned that future growth will be highly dependent on market movements, revealing that, under a poor market scenario, DC assets may stagnate at around £2trn by 2045, whereas strong performance could see assets rise to £4.1trn by 2044.

Assuming current trends continue, the aggregate value of private sector workplace DC assets could grow from £1.2trn in 2025 to around £2.2trn by 2045.

The PPI also stressed that DC asset growth will vary not only with economic conditions but also with saver behaviour, employer decisions and the pace of policy reform.

The association noted that a wide range of policy changes are expected over the next five years as part of the government’s ambition to improve DC saver outcomes, suggesting that, if these are delivered as planned, they could bring significant shifts in scheme structure, governance and retirement support.

"Alongside this, reforms to the advice and guidance boundary aim to improve access to personalised support without triggering regulated advice," it stated.

"Broader system initiatives, such as the relaunch of the Pensions Commission and the live launch of pensions dashboards, signal a wider focus on adequacy, engagement and sustainability".

However, the PPI argued that the delivery of this ambitious reform agenda will depend on legislative progress, regulatory capacity, and industry readiness over the coming years.

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