The expected future living standard in retirement provided by defined contribution (DC) savings rose in Q3, research from Aon has revealed, with all ages of savers expected to see an increase in their expected future living standard in retirement.

Aon's DC Tracker rose from 68.2 to 71.3 over the third quarter of 2025, driven by positive benchmark investment returns over the quarter, particularly in equity markets, and, to a lesser extent, an increase in expected return assumptions post-retirement.

This resulted in an increase in expected retirement income for all savers, although older savers benefited the most over the period from the impact of strong benchmark performance on their larger existing pots.

In particular, Aon found that the youngest saver saw the smallest increase of around £450 per annum, a 1.3 per cent increase, as positive actual investment performance was partially offset by a decrease in expected future investment return assumptions pre-retirement.

The 40-year-old saver saw an increase of around £1,200 per annum, or 2.9 per cent, in their expected retirement income, which was again driven by positive actual investment performance and a rise in post-retirement expected future returns.

However, the 50-year-old saver saw the largest increase of around £1,500 per annum, a 4 per cent increase, as this age group, with larger existing funds, benefited the most from the strong investment performance, particularly in equity markets.

This is despite recent changes in the required income for a moderate or comfortable standard under the Pensions UK Retirement Living Standards, and recent changes to salary sacrifice, which Aon acknowledged will reduce employee take-home pay and increase employer costs for DC savers making annual contributions in excess of £2,000 per year. 

However, Aon partner and head of UK retirement policy, Matthew Arends, stressed that it is "vital" to remember that salary sacrifice will remain a valuable option for employees saving towards retirement.  

"As the changes are not being implemented until April 2029, in the run-up to the change, there is a window of opportunity for sponsors and employees to maximise their use of salary sacrifice, potentially through options such as bonus sacrifice," he stated. 

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