Articles - Member behaviour emerges as a key driver of DC outcomes

There are differences in growth-asset exposure, portfolio construction and regional equity allocations which have contributed to an annual performance gap of around 7% p.a. between the best and worst-performing strategies. The firm highlights that while investment performance remains important, it is everyday life events that can have a significant impact on members’ retirement outcomes

DC pension schemes that currently focus on key areas such as investment performance, contribution rates and retirement age as the main drivers for retirement outcomes, risk being blind-sided on the impact member decisions can have. The leading pensions and financial services consultancy argue, that real world factors such as such as part-time working, periods of extended leave and early access to tax-free cash can have a greater impact on retirement adequacy than often realised. It warns that schemes that fail to take real-life behaviours into account, risk giving members a misleading picture of their expected retirement income. This reinforces the need for more personalised pension support from the pension industry, and from providers. 

Commenting on the need for the pensions industry to understand member behaviours, Shabna Islam, Head of DC Provider Relations, Hymans Robertson, said: “Members are individuals with varied lives, experiences and decisions. The significance of caring responsibilities, career gaps and part-time working must be considered alongside planning for retirement. The impact of these scenarios cannot simply be written off; our analysis shows that a five-year career break could reduce a member’s pension pot by 16%, while working part-time could leave it 13% lower. These are everyday experiences affecting everyday people.

“Ignoring these common scenarios won’t make the problem disappear. Employers who take the time to consider these realities, help their employees make better informed and planned decisions, will reap the rewards both today and in the longer term. Retirement planning is more than how much someone contributes today; it is also about understanding how career decisions, working patterns and access choices shape future outcomes.

“Our findings underline the importance of moving beyond generic pension communications. Employers and trustees should consider targeted engagement, flexible contribution structures and personalised modelling that help members understand the potential consequences of important career and retirement decisions.”

Commenting on what employers and trustees should consider on scale, Kathryn Fleming, Partner and Head of DC Consulting, Hymans Robertson, said: "The DC market is entering a period of significant change. New scale requirements, and the forthcoming Value for Money framework, will increase scrutiny on how providers are delivering outcomes for members and supporting retirement adequacy throughout their retirement journey.

"Scale can help providers access a broader range of investment opportunities and capabilities, but size alone won't determine success. Providers will ultimately be judged on their ability to translate those advantages into better member outcomes.

“Employers who consider their scheme design, and the support they offer, can have a huge impact both on the members’ financial resilience today and their income confidence in later life. Acknowledging that life events will have an impact, and tailored member communication that reflects this, brings a sense of reality to planning. Targeted communications, with clearly defined choices and personalised modelling, allows for better understanding of what decisions need to be taken today for the future. Trustees and employers should truly assess whether their provider's strategy, governance and support journey remain capable of delivering the retirement outcomes members need."

Hymans Robertson DC Provider Insights Report