Guest comment: Solving the future of DC

The DC landscape has experienced profound changes over the past decade.

These changes have led to concerns about contribution levels, charging structures, investment strategies, and small schemes, among other things.

The year’s PPI DC Future Book, in association with Columbia Threadneedle Investments, explores how moves to address these above concerns could, if carefully managed, increase the size of the pension pot of a hypothetical individual, Sam, who contributes 8 per cent of salary between age 22 and state pension age.

For example, using less volatile assets to allow similar returns to equities and reduce the need to de-risk significantly before retirement, could increase Sam’s pension pot in retirement by 3 per cent.

Sam’s pot could increase by 2-3 per cent through investment in illiquids or ESG funds.

A drop in charges, arising from scheme growth or consolidation could see Sam’s pot increase by between 6-8 per cent.

And increasing contribution levels and/or longer working could increase Sam’s pot size by 13 per cent and 5 per cent respectively.

While making the above advancements in governance and investment management might be tricky; industry, government and support bodies are currently working hard to ensure that people achieve the best possible outcomes from pension saving.

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