LONDON, September 25, 2025 – The UK's Defined Contribution (DC) pension landscape continues to undergo significant change, according to a new report published today by WTW. Annual management charges are still reducing despite the industry focus on value not cost, there are fewer bespoke default funds being offered, and a growing focus on decumulation strategies.
WTW’s 20th annual DC Pensions and Savings Survey 2025 finds that employers are now seeking to enhance their employee’s experience of retirement saving and improve outcomes by providing better support and guidance.
The study reveals that annual management charges for DC investments have decreased from an average of 38 basis points in 2017 to 28 basis points in 2025, with nearly two-thirds of schemes having charges below 30 basis points.
However, this reduction has sparked debate about whether there has been too much emphasis on keeping costs down and not enough attention on investment value.
The results show that while four-in-10 (39%) larger schemes are willing to consider increasing charges to access illiquid investments, only one-in-10 (12%) smaller schemes would consider it.
The trend towards off-the-shelf default funds has dramatically increased in prevalence from around half (47%) of funds in 2017 to nearly four-in-five (79%) DC funds in 2025.
Whilst providers have been evolving their defaults to address similar themes e.g. ESG and private markets integration, implementation varies widely by provider. Employers are being encouraged to reassess their investment strategies to ensure their provider’s solution remains appropriate.
“The question is whether we have now reached the stage where the focus on driving costs down has gone too far and whether there is room to increase value-for-money...”
Helen Holman | Head of DC Consulting, WTW
Helen Holman, Head of DC Consulting at WTW, said: "The question is whether we have now reached the stage where the focus on driving costs down has gone too far and whether there is room to increase value-for-money by accessing alternative investment strategies that can provide growth, diversification and value, despite higher costs.
“Whether illiquid assets, such as private equity or infrastructure, hold the potential to enhance risk-adjusted returns is a key debate in the pension industry, with the UK government seeking to encourage greater investment in illiquid assets via the Mansion House Compact.”
As DC pensions mature, decumulation strategies are becoming increasingly important. The government's upcoming legislation, expected to be implemented by 2027 for master trusts, will require pension schemes to identify and offer suitable retirement income products to members nearing retirement. This has led to discussions around 'flex then fix' approaches, where employees manage their retirement savings through drawdown before purchasing an annuity later in their retirement.
The rise of Collective Defined Contribution (CDC) schemes is also being explored as an alternative approach for both accumulation and decumulation and the study found that 15% of employers with their own-trust DC scheme were considering moving to CDC in the next two years.
The study finds that employers are prioritising the enhancement of the employee experience when it comes to retirement savings, rather than seeking to either increase contribution rates or cut costs.
Seven-in-10 (70%) employers are focusing on building engagement and improving retirement outcomes, while other top priorities are improving retirement outcomes (63%) and enhancing financial wellbeing support (62%).
Providing guidance services, rather than full financial advice, is seen as a cost-effective way to support workers approaching retirement. Currently, three-in-10 (29%) of employers provide or facilitate such services, with nearly seven-in-10 (69%) planning to do so in the next two years.
Holman said: "Guidance services stop short of full financial advice, but offer more cost-effective means to support workers, both as they approach retirement and to support general financial wellbeing. Increasingly we see companies looking to provide, and pay for, access to additional guidance for their employees.”
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Annual growth softens from 11% the previous year and is anticipated to slow further to 5% over the next three years, according to WTW.
