Five-Steps-to-Better-Workplace-Pensions-2024-DC-Pension-Scheme-Survey (2).pdf

Aon's DC blueprint

1. Five Steps to
Better Workplace
Pensions
2024 DC Pension Scheme Survey ?
How Does Your Scheme Compare?

2. Welcome to our 2024 Defined Contribution
(DC) Pension Scheme Survey results —
Five Steps to Better Workplace Pensions.
We received 214 responses covering schemes looking after
the retirement savings of around one million DC savers with
combined assets of over £60 billion. I would like to say a huge
thank you to all of those who participated.
Respondents represented a variety of roles, including HR,
pension managers, pension trustees and professionals involved
in running a DC scheme.
We have presented the findings in five areas we believe are key
to delivering good outcomes from workplace pensions:
1. Strategy and Design
2. Contributions and Adequacy
3. Investment
4. Engagement and Wider Wellbeing
5. At Retirement
Ben Roe
Head of DC Consulting
In each of these areas, we look at the current state of play
based on our survey results and share expert insights into the
steps that can be taken to deliver better pension outcomes.
Respondents told us of a wide range of priorities and
challenges specific to their circumstances, and in this report
we explore the common themes that emerged. These were
around providing good value ; driving adequate levels of saving ;
getting the right investment strategy to drive better member
returns; engaging DC savers ; and making sure appropriate
retirement support is available at the crucial decision point
when accessing pension savings.
I hope that you find this report insightful, but most importantly
useful to help you shape your priorities and actions to be able
to take better informed decisions to deliver to your objectives
for your own DC pension arrangements.
If there are any topics that you would like to discuss,
please get in contact with your usual Aon consultant,
or email [email protected] .  
Note: All charts and figures quoted in this report are taken from Aon’s 2024 DC Pension Scheme Survey unless otherwise stated. Some charts will not total 100% due to rounding or respondents being
able to select multiple options.Five Steps to Better Workplace Pensions
2

3. Our latest Defined
Contribution pension scheme
research covers the key
aspects of workplace pension
provision. We have identified
five areas for focus to help
deliver better outcomes for
DC savers and employers 1. Strategy and Design
●The most popular approach to pensions is to offer a benefit
in line with competitors.
●The top priority for respondents is ensuring their DC Plan
delivers good value for money.
●Nearly half are considering changing the structure of their
DC plan to help deliver better outcomes and to reduce the
governance burden of running a DC plan.
2. Contributions and Adequacy
●The median default contribution rate remains at around
6 percent from the company and 4 percent from the
employee, however there is a wide range between the
highest and lowest rates across all schemes.
●Only around one in three respondents know what sort
of pension outcome a typical member of their DC plan
can expect.
Executive Summary
3. Investments
●Eight in ten monitor component fund performance against
benchmarks, but only 3 in 10 monitor what this means for the
aggregate performance of their default fund.
●One in ten schemes are currently investing in illiquid assets.
4. Engagement and Wider Financial Wellbeing
●Three-quarters provide wider financial wellbeing support
outside of pensions, or plan to provide this in the next
two years.
●Offering an employee share scheme is around twice as
popular as workplace ISA.
5. At Retirement
●35 percent of respondents currently have a preferred
financial adviser firm to support members at retirement,
with a further 15 percent planning to do so.
●Most DC schemes report that less than 10 percent of
members have selected their own target retirement age,
although 40 percent of schemes do not measure this.Five Steps to Better Workplace Pensions
3

4. Five Steps to Better Workplace Pensions 4
1
Strategy
and Design
We sought to understand
why and how pension
plans are provided by
employers in the UK, as well
as understanding current
and longer-term priorities.

5. Five Steps to Better Workplace Pensions 5
● 42 percent of respondents aim to offer pension benefits
in line with peers
● Providing good member outcomes has fallen to
second most popular aim for DC schemes (36 percent)
● The top priority of those running DC plans is ensuring
they deliver good value for money
● Nearly half of all respondents (47 percent) are considering
a change to their DC structure
● In five years, master trusts are expected to overtake
own trust and contract-based arrangements as
the most used DC structures
Key Findings
1

6. Five Steps to Better Workplace Pensions 6
1
The most popular approach is for schemes to align the
pension offering with competitors (42 percent) ahead of
offering a pension designed to deliver sufficient funds
for employees to be able to retire at a reasonable age
(36 percent).
This is a somewhat backward step from our previous
research in 2022 which, for the first time, found the
most popular response was to offer a pension aiming to
provide sufficient outcomes (46 percent compared to
28 percent aiming to align with competitors in 2022).
Interestingly, there is a large divergence of views
depending on the role of the respondent. 64 percent of
HR and benefits managers say their aim is to match the
pension of competitors compared to only 31 percent
of trustees and 40 percent of pension managers. This
suggests a disconnect in objectives between different
stakeholders involved.
14 percent, or one in seven respondents, say they aim
to provide a market-leading benefit, showing there are
many employers and pension schemes who are pushing
the boundaries for others to follow. Just four percent say
they do the bare minimum, seeing pensions as a hygiene
factor rather than a valuable benefit for employees.
What is Driving Your Overall Approach to DC Pensions?
Strategy and Design
0%
10%
20%
30%
40%
50%
OtherWe aim to offer a
market leading
pension benefit
We aim to offer a
pension benefit that
will deliver sufficient
funds for employees to
retire at a reasonable age
We aim to offer
a pension benefit
broadly in line with
our competitors
We do the minimum
required to comply
with regulations
42%
36%
14%
5%
4%

7. It is perhaps no surprise to see that the
top priority for respondents is ensuring
good value for money. Pension schemes
grapple with diverse priorities balancing
aspects such as investment strategies,
regulatory compliance and member
expectations. Economic uncertainty also
poses a challenge. Achieving value for
money becomes a universal priority as it
involves efficiency across all areas — if
you achieve good value for money, you
are probably doing a lot of things right.
Additionally, there has been a lot of talk
of the new Value for Money Framework
which helps drive focus in this area.
Given the impact that DC savers making
appropriate decisions can have on their
overall outcomes, it is encouraging to
see 42 percent are prioritising specific
communication or engagement objectives.
At the same time, given the potential
impact of investment returns, we would
perhaps expect more than a third of
schemes (32 percent) focusing on this.
We explore these issues in more depth in
sections three and four of this report.
With the amount of continuous change in the UK pension landscape, it can be challenging to
prioritise and filter out the ‘important’ from the ‘urgent’ and to move from ensuring regulatory boxes
are ticked to focusing on activity that will make the most improvement to outcomes for DC savers.
We asked respondents for their top three priorities.
What Are Your Top Three Priorities?
0% 10% 20% 30% 40% 50% 60% 70% 80%
Considering our DC Plan through an
Equity, Diversity & Inclusion (ED&I) lens
Managing risks including Cyber
Reducing charges
Other
Increasing member contribution levels
Understanding member needs and
creating effective member feedback loops
Using the DC Plan as part of a broader
financial wellbeing programme
Reviewing our DC Plan investment strategy
Developing specific communication or
engagement objectives
Governance and oversight of our DC plan
Ensuring the DC Plan delivers good value
for money
61%
42%
42%
32%
29%
18%
17%
12%
12%
12%
7%
With the General Code of Practice for
trust-based DC schemes having been
launched this year, it is not a shock to
see governance and oversight is a key
priority. Those running master trust and
group personal pension arrangements
also recognise the benefits of good
governance to help focus on the priority
areas, maximising the value and
minimising the risk associated with their
pension arrangements.
At the other end of the scale, it is
somewhat surprising to see only
17 percent are prioritising increasing
member contributions given this is such
a key determinant of pension outcomes.
Interestingly this was much higher, at
28 percent amongst HR and Benefit
respondents. It may be that concerns
about cost of living pressures have
moved focus onto other priorities, but
these should be weighed against the
benefits of saving early towards
retirement where possible.Five Steps to Better Workplace Pensions
7
1

8. AON EXPLAINER
Value for Money Framework
In their pursuit for better saver outcomes,
the government and regulatory bodies have
confirmed plans to introduce a consistent and
objective process for assessing and comparing
DC schemes on value. They believe that this,
coupled with public disclosure of data and results
on an annual basis, will drive improvements in
DC schemes, leading to greater competition in
the market, and helping drive consolidation.
The framework will cover three quantifiable
areas: investment performance , costs and
charges and quality of services. Schemes will
be required to compare against other schemes’
arrangements and take action if they are not
demonstrating good value. The government says
it will legislate for this new framework when
parliamentary time allows. Five Steps to Better Workplace Pensions
8
1

9. At our 2024 Aon Pension Conference, we modelled the impact that different elements of bad value could have for an example DC saver
using assumptions based on market research. This is illustrated in the chart below:
How Does Value Have a Meaningful Impact on the Pension Outcomes?
£48,000 p.a.
pension income
Good value
DC outcome
£27,000 p.a.
pension income
£13,000 p.a.
pension income
£11,000 p.a.
pension income
Did not use
contribution
match
Poor
investment
performance
High
charges
£7,500 p.a.
pension income
Bad
retirement
choices
EXPERT VIEW
Jenny Swift
DC Market Specialist
It is fantastic to see our survey
respondents focussing more on value
for money. It is also crucial to understand
the connection between good value
and good outcomes as shown here.
In particular, member charges, while
important to get right, have considerably
less impact on retirement outcomes than
savings levels and importantly, investment
returns. As such, understanding what
your provider is doing in this regard and
comparing with market alternatives is key
to ensure you and your people get the
most from their scheme.
Example DC Saver
Age 21
Salary £25,000
Contribution Rate 16% / 9%
Working Life 45 years
Difference between
the median default
and median
maximum matching
contribution rates
Difference between
the upper and lower
quartile master trust
default investment
performance for
growth phase of
lifestyle
Difference between
median and upper
decile of charges for
member in default
Difference for
member invested
in cash fund at
retail charge level
while drawing down
income in retirement
44%
52%
15%
32%Five Steps to Better Workplace Pensions
9
1

10. We asked participants what type of plan they use to provide their main DC benefits and what type
of plan they expect to use in five years’ time. We compared this to the same question from our 2017
survey to illustrate the significant shift in the DC landscape from single employer trusts to master
trust over recent years.
A Changing Landscape of DC Pension Structures
Current and Expected Future DC Structure
● 2017 ● 2024 ● 2029 (Expected)
0%
10%
20%
30%
40%
50%
60%
Contract based (GPP or GSIPP)Master trustOwn trust
57%
41%
26%
10%
27%
45%
33%
32%
30%
Master trusts currently trail single
employer’s own trust and contract-based
arrangements in popularity among our
respondents, but are expected to be the
most common plan type in five years’ time.
With the focus from The Pensions
Regulator and government on
consolidation, based on the view that
larger schemes will deliver better value,
it may be something of a surprise that
26 percent of respondents expect to
retain an own trust structure five years
from now. Some of these may be hybrid
arrangements where DC and DB are
different sections of the same trust. Given
the recent improvements in the funding
position of many DB schemes, there has
been considerable interest in exploring
the possibility of using a DB surplus to
fund employer contributions to a DC
section under the same trust. Five Steps to Better Workplace Pensions
10
1

11. 0%5%10%15%20%25%30%35%
Lack of suitable skilled trustees
Other
Time and resources needed
for operating DC plan
Cost of running DC plan
Governance requirements
Expect other structure to deliver
better member outcomes
31%
21%
17%
16%
12%
3%
Nearly half of respondents (47 percent) are considering a change to the structure of their DC plan. The reasons given
for a move are fairly evenly distributed, with a mixture of better outcomes for members (31 percent) and the impact
of additional governance requirements on the time and cost of running a DC plan being the leading responses. Other
reasons specified included use of DB surplus; company strategy to consolidate; and better technology. Five Steps to Better Workplace Pensions
11
Considering
moving structure
47%
Not considering
moving
53%
1
WHAT IS AON DOING?
DC Solutions
Aon’s DC Solutions, including our Master Trust and
GPP, are designed to help our clients outsource
the regulatory compliance, administration and
investment design to professionals while providing
a first-class scheme to deliver better outcomes for
pension members.
We have recently created a Blended DC solution
to support clients who are looking to partially
outsource while retaining the own trust scheme
for active members. This may be to benefit from
outsourcing efficiencies where appropriate (e.g.,
for deferred members or pensions paid via flexible
drawdown), while continuing to keep more direct
control over the support for employees. Or perhaps
because of a link with a DB scheme which could be
advantageous if an employer can use a DB surplus
to fund company contributions for the DC scheme.
Aon’s Blended DC solution has the added benefit of
offering our market-leading fiduciary DC investment
approach for all members, alongside support with
members’ wider finances, not just their pension.
If You Were to Consider Moving From Your Current Governance Structure, What Would
Be the Main Reason for the Move?

12. When Did You Last Review Your DC Plan Structure and/or Provider?
It is encouraging to see that around two thirds of respondents have
conducted a review of their DC plan structure and/or provider within
the last three years, although this means that one third have not
reviewed for three years or more or do not know when their DC plan
structure was last assessed.
A regular review is crucial as it allows stakeholders to assess not only
the competitiveness of the plan in the current market landscape, but
also to check that the current set-up aligns with overall objectives.
Ensuring that the plan provider is delivering what is needed in terms of
member support and tools, investment performance and appropriate
retirement support, is essential for delivering good pension outcomes
for DC savers.Five Steps to Better Workplace Pensions
12
Within last
12 months
29%
1–3 years
36%
Over 3 years
24%
Don’t know
11%
1

13. How Do You Measure Progress Against Objectives?
0% 10% 20% 30% 40% 50% 60% 70% 80%
Other
We don’t currently measure progress
against objectives
Employee feedback via focus groups
Ad-hoc measurable data reporting
Employee feedback via surveys
Ad-hoc feedback to trustees
or HR/pensions teams
Measurable data reporting
on a regular basis
61%
39%
31%
28%
11%
11%
4%
Measuring progress against your objectives allows
you to assess the extent to which your efforts are
helping to achieve your intended goals. This allows for
accountability, helps identify areas for improvement and
ensures that your resources are effectively deployed.
It is positive to see that nearly two-thirds (61 percent) of
respondents consider data reporting on a regular basis.
Access to the appropriate data can clearly show whether
progress is being made. There are, however, some
objectives, such as increasing employee understanding
where standard reporting data may not provide the
complete picture and receiving qualitative feedback
directly from employees can be invaluable.
Reassuringly, only around one in ten respondents
(11 percent) do not currently measure progress against
objectives.
Regular assessment enables refinement, innovation and
proactive response to challenges.Five Steps to Better Workplace Pensions
13
1

14. 12345
1Five Steps to Better Workplace Pensions
14
Five Steps to Better Strategy and Governance
Align stakeholders to
agree the overall aim and
objectives for your DC plan.
Review your current
DC Plan in the context of
your overall objectives,
including interaction with
DB plans where relevant
and importantly which
structure might provide
better member outcomes.
Identify and agree the
priority areas to best
focus your resources.
Understand what your
current DC provider
can deliver and compare
with market alternatives
to ensure your DC
plan members are
not missing out.
Monitor progress
to drive continuous
improvement.

15. Five Steps to Better Workplace Pensions 15
2
Contributions
and Adequacy
The amount saved into a
DC pension is generally
the biggest factor in whether
it will deliver an adequate
level of pension income
into retirement. DC savers
typically anchor around
the default or matching
contribution rates designed
by their employer, making
the decision on contribution
design a key step in delivering
better workplace pensions.

16. 2Five Steps to Better Workplace Pensions
16
● The median default contribution rate is ten percent ,
consisting of six percent from the company and four
percent from employees. This has remained static over
recent years, however there is a wide range between
the highest and lowest rates across schemes
● Most schemes offer some form of matching, enabling
employees to receive a higher company contribution if
they save more
● Only around a third (35 percent) know what pension
outcome a typical member could expect from their
DC Plan
Key Findings

17. Median pension contribution rates from employers have
remained at roughly the same level over the previous
4–5 years. Prior to this we saw a drop in rates, likely
with an aim to control pension cost increases due to
far higher employee participation levels following the
phased introduction of automatic enrolment.
The median default company rate remains at
six percent. This is the same as the median minimum
level of company contribution, as employees are often
defaulted into pension savings at the lowest company
contribution level.
How Much Do Employers Contribute to DC Pensions?
Contributions and Adequacy
Median Company Contributions Over Time
● Minimum ● Default ● Maximum
0%
2%
4%
6%
8%
10%
12%
14%
20242021201920172015
Where employers offer the option to receive higher
company pension contributions, either through a
matching offer based on the employee contribution
level, or through another route such as role or length
of service, the median here has also remained broadly
stable over the last 4–5 years at ten percent of
pensionable pay.
There is, however, considerable variation in contribution
levels across industry sectors. The box plot charts
on the following page illustrate the wide range of
contributions rates offered.
EXPERT VIEW
Clare Freeman
DC Retirement
Adequacy Specialist
It is positive to see that contribution rates have
remained relatively stable since 2020 despite a range
of global economic pressures.
This shows there remains a commitment from most
employers to go beyond the minimum statutory
requirement of three percent of qualifying earnings.
While some economic pressures are behind us, my
concerns turn to the future financial landscape and
spikes in the cost of living. The question remains
whether the current default employer and employee
contribution rates are sufficient to deliver adequate
member outcomes.
For employers who have worked to eliminate costs
associated with legacy defined benefit pension plans,
I challenge them to consider whether some of the
savings could be used to improve outcomes for
current DC plan members.Five Steps to Better Workplace Pensions
17
2

18. The Median default employer contribution rate is six percent,
but this means that around half of schemes have a default
contribution rate above or below this level. The top quarter
of employers have a default rate above ten percent and the
bottom quarter have a default rate below five percent, as
shown by the outer edges of the dark blue box on the chart to
the left. Sectors such as finance and health services are more
typically at the higher end of the scale.
The minimum contribution rate offered by employers is not
markedly dissimilar to the default rate, with a median at the
same six percent level and upper and lower quartiles of eight
percent and five percent respectively.
There is a greater differential for the maximum company
contributions, with the upper to lower quartile ranging from
above 12 percent to below eight percent and the top decile of
employers offering company contributions above 16 percent
of pensionable pay. This is in addition to any pension
contribution made by the individual employee.  
What are the Minimum, Default and Maximum Pension Contribution Rates for a New Joiner to Your Plan?
Company Contributions (%)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Bottom decile
i.e. 10% of respondents offer
contributions below this level
Upper decile
i.e. 10% of respondents offer
contributions above this level
Lower quartile
i.e. 25% of respondents offer
contributions below this level
Upper quartile
i.e. 25% of respondents offer
contributions above this level
Median
i.e. 50% of respondents offer
contributions above and below this level
Minimum
Contribution
Level
Default
Contribution
Level
Maximum
Contribution
Level
● Minimum ● Default ● MaximumFive Steps to Better Workplace Pensions 18
2

19. Employee Contributions (%)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Bottom decile
i.e. 10% of respondents below
this level
Upper decile
i.e. 10% of respondents above
this level
Lower quartile
i.e. 25% of respondents below
this level
Upper quartile
i.e. 25% of respondents above
this level
Median
i.e. 50% of respondents above
and below this level
Minimum
Contribution
Level
Default
Contribution
Level
Maximum Contribution
Level (to receive maximum
Company match)
Most employers require some level of employee
contribution as a condition of pension plan membership,
although around ten percent of respondents offer a
standalone company pension contribution with no
requirement for the employee to contribute. A typical
employee starting contribution rate is around three
percent to four percent of pensionable salary, increasing
to a range of five percent to eight percent to receive
a maximum company matching rate.
● Minimum ● Default ● MaximumFive Steps to Better Workplace Pensions
19
2

20. 58 percent of schemes offer contribution matching.
This can be an attractive option for employers as it
provides individuals with a clear incentive to boost their
contributions and fosters a collaborative approach to
retirement planning. If they pay in more, their employer
will do so too. Employers may also feel that their spend
on pension contributions as part of overall pay and
rewards is being tilted towards those employees who
value it most.
Just over one in four respondents has a pension scheme
with a flat rate contribution structure, whereby the
employer continues to contribute the same amount
regardless of whether the employee saves more into
their pension. This is a significant rise from around
one in eight in our 2022 survey and may be due to an
increased desire from employers to fix costs relating to
their pension benefits.
Few schemes now offer different rates of pension
contributions based on age or service, with many
employers concerned about falling foul of discrimination
legislation. However around one in five respondents
have legacy pension structures (see following page),
which can be more likely to base contribution rates
around different factors such as these.
What Best Describes Your Contribution Structure?
Matching
58%
Flat rate
27%
Age related
3%
Service related
4%
Role related
5%
Other
4% Five Steps to Better Workplace Pensions
20
2

21. Four in ten of our respondents operate more than one
pension contribution structure within their organisation.
This is most commonly because organisations continue
to operate a legacy structure for employees (22 percent).
This may be due to M&A activity , or because a decision
was previously taken not to affect groups of employees
when making changes to pension design. Other
structures include the 16 percent of respondents with
different options for higher earners and the 12 percent
with different options for temporary/new employees.
Do You Provide Different Contribution Structures for Different Groups?
0% 10% 20% 30% 40% 50% 60%
For temporary employees/during
first months or years of employment
For different business units
For higher earners
Employees on legacy
contribution structures
All our employees are on the
same contribution structure 61%
22%
16%
12%
4%
Operating multiple pension designs increases
complexity in communications and operational issues,
which can pose a risk to businesses. In addition, as
focus intensifies on building inclusive, equal workforces ,
unequal pension arrangements can increasingly be
deemed to be unacceptable with the evolving standards
of workplace equality.
EXPERT VIEW
John Foster
Partner DC Pensions
It is becoming less common for employers to offer
higher levels of pension contributions to senior
individuals within a business. There are several
drivers for this; including the desire to provide a
more equitable benefit offering, the tax treatment
of pension contributions for higher earners
and the threat of censure from investor bodies
such as the Investment Association. It can be a
complex and potentially emotive topic, especially
for the individuals affected. In the same way as
for the significant proportion of arrangements
with legacy contribution structures, a good way
to start is to agree the overarching objective
and rationale for any change. Key to successful
change is to inform the strategy by looking at
pension contributions in the context of overall
benefits and reward and to understand what
others have done in a similar situation to manage
the potential impact on individuals affected.Five Steps to Better Workplace Pensions
21
2

22. 0% 5% 10% 15% 20% 25%
Based on another measure
Based on replacement
salary ratio
Based on the Retirement
Living Standards
22%
9%
4%
Nearly two-thirds of respondents do not know the
expected outcome for a lifetime member of their plan.
Pension scheme trustees were the most likely to report
that they know the expected outcomes for members of
their DC Plan, with 51 percent of this group responding
positively. HR and benefits professionals were the least
likely with 88 percent of this group admitting they did
not know the expected pension outcome for a lifetime
member of their workplace DC pension plan.
Do You Know the Expected Outcome for a Typical Lifetime Member of your DC Plan?
Of those that do know, just over one in five (22 percent)
of respondents say they consider DC plan member
outcomes based on the Pensions and Lifetime Savings
Association’s Retirement Living Standards . The
Retirement Living Standards were launched in 2019 to
help people to understand the cost in monetary terms of
three different levels of lifestyle in retirement.
Yes
35%
No
65%Five Steps to Better Workplace Pensions
22
2

23. Are DC Savers Facing Serious Issues With Retirement Affordability?
0%
20%
40%
60%
80%
100%
Around the Minimum single
person level (£10k) or less
5%
43%
18%
23%
13%
Between the Minimum
and Moderate single person
levels (£10k–£20k)
Around the Moderate
single person level (£20k)
Between Moderate and
Comfortable single person
level (£20k–£30k)
Around the Comfortable
single person level (£30k)
or above
Of those respondents who use the
Retirement Living Standards to
measure member outcomes, just
over half (52 percent) reported
that they expected a typical
member to achieve a moderate
level or above, with almost half (48
percent) not expecting members
to achieve a moderate standard
including state pension.
Since the respondents completed
this survey, the expenditure
needed for the moderate living
standard has risen by over a
third to £31,300. It is therefore
likely that more DC plans would
now expect member outcomes
to fall below the moderate level,
compounding serious issues with
retirement affordability in future.
Aon’s DC Pension and Financial
Wellbeing Employee Research
2021 found that 87 percent of
employees who responded were
expecting a shortfall in retirement
income and more people than ever
expected to need to continue work
past their State Pension Age. Retirement Living Standards Expected Outcome Level
EXPERT VIEW
Steven Leigh
Associate Partner
I am disappointed to see how many stakeholders do not have visibility
of expected outcomes from their pension arrangements. At 65 percent,
this level is similar to our previous research in 2022 and therefore
shows a distinct lack of progress in understanding this fundamental
element of workplace pensions.
I believe that knowledge of likely member outcomes using recognised
metrics, such as the PLSA’s Retirement Living Standards, is the
starting point for assessing whether a pension scheme is delivering
good value. This understanding can then inform decisions on what
actions would best deliver improved outcomes, and whether any
specific groups are falling behind.
I recognise that most DC savers are likely to move employment several
times during their working life, but I do not think this gives a free pass
to DC schemes to disregard whether they are delivering an adequate
level of savings for the relevant period of membership. I have been
working with many DC schemes on reviewing adequacy levels across
their membership and it is interesting to see the range of different
approaches that can be taken to deliver improvements — it is not
always about higher contributions from the sponsoring employer. Five Steps to Better Workplace Pensions
23
2

24. 0%
20%
40%
60%
80%
100%
120%
>7065–7060–6555–6050–5545–5040–4535–4025–3020–2515–20
Likelihood of Members Achieving an Adequate Outcome Example
● Highly Unlikely ● Unlikely ● Moderate  ● Likely ● Highly Likely
WHAT IS AON DOING?
DC Analytics
Aon’s DC Analytics is a tool to help understand whether pension scheme members are on track for retirement. It
works by assigning a retirement target starting with the Retirement Living Standards figures and proportioning
these on a member’s expected salary at retirement. It then considers estimated State Pension and other pensioned
employment periods, allows for future returns and how the pension will be accessed, to produce a summary of
whether a member is on track.
2Five Steps to Better Workplace Pensions
24

25. Employers can help to offset some of the costs to employees
of pension savings by setting up a salary sacrifice arrangement
to facilitate pension contributions. Recent reductions in the
rates of employee National Insurance mean that the savings
are reduced compared to previous years, but salary sacrifice
remains a popular option for DC schemes.
Other Ways to Help Enhance Pension Savings
AON EXPLAINER
Salary/Bonus Sacrifice
Salary sacrifice is a financial arrangement
whereby an employee agrees to give up a portion
of their salary in exchange for an alternative
benefit, in this case an increased employer
contribution to their pension.
This sacrifice is done before income tax and
National Insurance Contributions are deducted,
resulting in potential savings in National
Insurance Contributions paid by both the
employee and employer.
Bonus sacrifice involves an employee agreeing
to exchange part or all of their bonus payment
for an increased pension contribution.
There are some nuances to ensuring that a
salary sacrifice agreement is valid from the
perspective of HMRC. It is important to get the
timing, operation, and communications right to
avoid an unwanted tax bill if set up incorrectly.
2
90% 63%
operate salary sacrifice
to enable employees and
the company to save
on National Insurance
Contributions on their
regular pension contributions
operate bonus sacrifice
to enable similar savings
for employees and the
company on one-off
pension contributions made
from bonus payments Five Steps to Better Workplace Pensions
25

26. 12345
2Five Steps to Better Workplace Pensions
26
Five Steps to Better Contributions and Adequacy
Agree what level of target
outcome you are trying to
achieve for members of
your DC plan.
Take time to understand
expected member outcomes
at retirement based on your
current set up.
Consider whether
any groups are falling
behind others.
Consider the impact that
changes to the Retirement
Living Standards may have
in terms of the adequacy
of expected outcomes and
expectations.
Identify what steps would
be most effective and
most practical to improve
outcomes for your
pension members.

27. Five Steps to Better Workplace Pensions 27
3
Investments
Investment returns after charges are a critical
factor in delivering the best possible outcomes
for DC savers.
Markets have been particularly volatile over recent years impacted
by events such as the global pandemic in 2020 and more recently
geopolitical instability, the war in Ukraine and the highest levels
of inflation seen in the UK for several decades. Most DC savers are
invested for the long term, so volatility is usually only a cause for
concern around the time they are accessing their savings. However,
it is important that returns in the early years deliver growth above
inflation to give members real returns on their savings.
Responsible investing has become a higher priority for many DC
schemes, offering the potential for double materiality — improving
investment returns for DC savers and making it more likely there will
be a sustainable future into which they can retire.
There is also increasing focus on private market investments, with
rare political consensus in the UK on the desire to direct pension
savings into investments to help drive growth in UK businesses and
infrastructure. Against this backdrop, there is a lot to consider for
DC schemes when it comes to investing, but are schemes getting the
basics right?

28. 3Five Steps to Better Workplace Pensions
28
● 82 percent of schemes have a default option targeting
flexible drawdown or a mixed approach at retirement,
while only eight percent target annuity purchase
● 70 percent of schemes monitor investment performance
of individual funds against benchmarks, but only 29
percent monitor the overall aggregate performance for
a member invested in the default option
● 41 percent of schemes now assess all their investment
options against ESG criteria
● DC charges are at their lowest levels , but cheapest
is not always the same as best value
● Ten percent are investing in illiquid assets, but most
are either not considering this option or do not know
whether they are invested or not
Key Findings

29. Most DC savers do not make
their own investment choice,
meaning that the default
investment option offered by
a DC plan plays a key role.
The default investment option for
pension scheme members needs
to get the right balance of target
returns over inflation in the long
term versus mitigating downside
risks, as well as supporting the way
in which members will access their
DC pension savings in retirement.
We asked DC schemes what
outcome their default investment
targets for members at retirement
and compared the responses to
our previous research.
Evolving Investment Design
Investments
0%
10%
20%
30%
40%
50%
60%
OtherA combinationCash lump sum(s)DrawdownAnnuity
39%
22%
12%
8%
27%
7%
5%
4%
7%
23%
27%
32%
23%
4%
5%5%
6%
41%
54%
51%
We are now ten years on from the
announcement of ‘pension freedoms’
in April 2014 which opened up new
options for DC savers accessing their
pension funds. Our survey results
reflect the move from default strategies
targeting an annuity as a member’s
end goal, towards using drawdown or
a mixed approach instead.
Over 80 percent of schemes are
now targeting either drawdown
or a mixed approach for members
accessing savings, nearly double the
number that were doing so in 2017.
In 2017, 39 percent of schemes
were still targeting annuities for
members, compared to just eight
percent today. While the latest data
from the Association of British
Insurers (ABI) reports an uptick in
the level of retirement funds used to
buy annuities at retirement, it is too
soon to determine whether this will
be a significant enough trend to be
reflected in future changes to default
investment targets.
● 2017 ● 2019 ● 2022 ● 2024
3Five Steps to Better Workplace Pensions
29

30. EXPERT VIEW
Jo Sharples
CIO for Aon DC Solutions
It has never been more apparent that the choice of a
good default option can make a huge difference to
member outcomes. For example at the end of 2023,
the gap between the 5-year returns from the top and
lower performing master trust default fund for a member
in their early years was over four percent per year.
Projected over a full career, this level of difference
in performance could more than half (or double) the
amount of a member’s income in retirement. I am proud
of the work we have done to consistently deliver leading
returns for DC savers in the Aon MasterTrust and GPP
and I urge all involved in DC pension decisions to make
sure the default investment is monitored and delivering
for members of their plan.
3Five Steps to Better Workplace Pensions
30

31. Making the Connection Between Investment Performance and Retirement Outcomes
Our results show that most schemes (70 percent) monitor the performance
of individual investment funds against their benchmark, but less than a
third (29 percent) consider the investment returns in aggregate for a member
invested in the default investment option.
Focusing only on performance of individual funds against benchmarks
does not help understanding of whether the default strategy as a whole is
delivering the returns that DC savers need.
It is becoming more common to measure returns compared to other schemes
or DC providers (25 percent of respondents do this). This will become easier
in future under the proposed Value for Members framework that will require
DC schemes and providers to publish comparable performance data on their
investment options.
This data can be useful from a scheme perspective, as a sense check of
the long-term returns from your approach. However there is a risk that too
much market focus on what others are doing could lead to a herd mentality
in investment design. Schemes may be driven by a fear of deviating from
benchmarks leading ultimately to a lack of innovation, which could cost future
DC savers in missed opportunities.
The gold standard is to monitor against scheme-specific targets for
investment returns and volatility as this allows those running schemes to
understand how their default investment is performing in relation to delivering
a good outcome for their own members. Only 12 percent of schemes currently
monitor their default investment performance against their own specific
return targets and even fewer, nine percent, against volatility targets.
0% 10% 20% 30% 40% 50% 60% 70% 80%
Other
Volatility versus tailored objectives
for different periods to retirement
Returns versus tailored objectives
for different periods to retirement
Returns versus comparator schemes
or other DC providers
Aggregate returns for a member
invested in the default at different
stages of the glidepath
Returns of the component funds
versus benchmarks
70%
29%
25%
12%
9%
3%
How Do You Monitor the Performance of Your Default Investment Option?
3Five Steps to Better Workplace Pensions
31

32. WHAT IS AON DOING?
Investment Performance Monitoring0% 2% 4% 6% 8% 10% 12% 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Default performance Years to target retirement age
EXPERT VIEW
Jit Parekh
DC Investment Partner
I think it is unfortunate that the end goal, the
income members actually need through
retirement, is rarely the starting point for
setting investment objectives. While measuring
investment performance of individual
components is helpful, it does little to help
translate the overall experience for members
and therefore makes it difficult to justify whether
good outcomes are indeed being delivered.
We strongly believe that having a clearer
understanding of what the strategy is trying to
achieve, and measuring this more effectively by
linking to actual member experience, can lead
to better outcomes.
It allows schemes to make more informed
decisions around the membership and empowers
the ability to take corrective action where
necessary to maximise likelihood of staying on
track for a good retirement outcome.
● Actual performance ● Target returns
3
Aon’s Member Investment Experience is a new type of
investment reporting.
It allows schemes to understand the actual performance
experienced by members invested in a lifestyle or target
date fund and to compare this against appropriate
performance measures, such as inflation linked targets.
This enables schemes to understand whether their
default investment option is on track to provide the
returns their DC savers need to achieve an adequate
retirement outcome.
Aon’s delegated DC investment approach, used in
the Aon MasterTrust and other DC Solutions, takes
this a stage further by adjusting the glidepath of the
default investment to automatically ‘bank’ returns when
performance is ahead of target. This offers the potential
for greater security of outcomes for members by
reducing the investment risk in their later years. Example Default Performance MonitoringFive Steps to Better Workplace Pensions
32

33. Slow But Steady Progress on Responsible Investing
We asked respondents about their approach to ESG investment.
The most popular response, from 46 percent of schemes, was
that they assess all their investment funds against ESG criteria.
45 percent of schemes choose ESG funds for members to
self-select, a fall from 56 percent in our 2022 survey. This is
balanced by a similar increase in schemes delegating this to
their provider. This is roughly correlated with more schemes
outsourcing DC provision to master trust from own trust over
the period, (see chapter 1 for more on this trend).
0% 10% 20% 30% 40% 50% 60%
We have decided not to offer any
ESG options to members
Our default investment strategy invests
solely in ESG screened funds
We offer the members the choice of our
provider’s standard range of ESG fund(s)
We have selected one or more ESG funds
that members can choose if they wish
We assess all investment options made
available against ESG criteria
46%
36%
45%
23%
18%
15%
2%
6%
42%
56%
Environmental, Social and Governance
(ESG) factors are one of the leading areas
of focus for investors — and not just in
the world of pensions. From wildfires and
flooding, to the 2023 COP28 summit
in Dubai, it is impossible to ignore the
societal drive to address climate change
and the wider social impact of investment
practices.
At DC pension scheme level, our findings
show there is still a wide variation in
schemes’ approaches to ESG. The
Pensions Regulator now requires all trust-
based schemes to document how their
policies consider ESG and climate factors.
They must also disclose on an annual
basis how their principles have been
implemented. During 2023, The Pensions
Regulator undertook a campaign to make
sure trustees are meeting their ESG and
climate change reporting duties.
18 percent of respondents make it easy for their members by
investing their default option purely in ESG funds. In practice,
many more schemes have some level of ESG integration in their
default but have not made it a specific requirement that
all funds must be ESG screened.
Despite these promising results, for many schemes moving
beyond fulfilling regulatory compliance, and genuinely
embedding ESG in investment design, is still a work in progress.Approaches to Responsible/ESG Investment
● 2022 ● 2024
3Five Steps to Better Workplace Pensions
33

34. EXPERT VIEW
Kath Patel
Head of DC
Responsible
Investing
Our results show slow but steady movement from DC pension schemes towards
responsible investing practices, particularly in default investment strategies. This
kind of progress is key to ensuring ESG risks and opportunities are managed on
behalf of members given the relatively low proportion of DC savers who make
their own investment choices.
However — I would urge those running pension schemes not to let perfection stand in
the way of progress when it comes to responsible investing. We are still 26 years away
from 2050 and scientists think that we may have already missed the boat on the target
to keep global temperature increases to 1.5 degrees or below pre-industrial levels.
There are still some barriers to the pace of adoption of responsible investing:
where to start, finding the time to carry out detailed analysis and the reliability
and availability of ESG data across asset classes and strategies. Below is my
suggested framework to help make better decisions and progress further and
faster when it comes to responsible investing:
1. Agree Your Principles
I commonly see differing views amongst decision makers when it comes to
responsible investing, let alone what preferences wider stakeholders such as
sponsoring employers and members might have. In order to make progress
and achieve any ESG-related goals it is crucial to openly discuss and agree
collective principles and beliefs to help inform future decision making on the
implementation of responsible investment. For example, is there a preference to
screen investments, focus on engaging with fund managers, utilise funds that
seek to have a positive impact, or to combine some or all of these approaches?
2. Understand Your Current Investments
Understanding the current ESG-risk profile of your investments will inform better
future decision making and help you address the biggest risks. Regulations are
already in place to encourage this: schemes with over £1bn of assets are required
to align with the recommendations of the Taskforce on Climate-related Financial
Disclosures (TCFD); and stewardship and climate change are covered in the
recently published General Code of Practice.
That said, there isn’t yet a single perfect tool to help with quantifying ESG risks
so DC schemes should bear this in mind as part of their reviews. For example,
ESG ratings are widely used but vary widely across providers — a consultation
is coming to improve consistency on these which is very much welcome, along
with the Sustainable Disclosure Regulations (SDR) on the appropriate labelling of
funds to reduce the practice of greenwashing.
3. Consider Opportunities as Well as Risk Mitigation
Responsible investment is not just about risk mitigation; the shift to a more sustainable
society will create huge investment opportunities through innovation, regulatory
changes and shifts in consumer demand. These opportunities offer potential for higher
investment returns which will certainly be needed for DC savers amidst increases to
the cost of living and potential delays to receiving a state pension in future.
4. Review and Evolve Your Approach
Reducing carbon emissions is clearly important in the context of mitigating global
temperature increases and data on this is more readily available (if still imperfect)
than on many other ESG factors. Nature, biodiversity and social factors are all
important and more focus is coming from regulators and DC savers on these
areas as well as carbon emissions. Data on monitoring these wider factors — and
therefore their systematic incorporation into investment strategies — is continuing
to develop and evolve, as is our understanding of how material these risks are.
This means that being open to evolving your responsible investment strategy will
be key to ongoing success.
Beyond the data, I’d advise DC schemes not to forget the potential power that
engagement has in managing these risks on members’ behalf. Again, engagement
is a journey, so the importance of continuing to review how managers are
approaching this on your behalf is crucial.
3Five Steps to Better Workplace Pensions
34

35. Charges
The median charge for a member invested in the
default option of our respondents’ DC is 0.28 percent.
Charges have fallen over recent years as DC plans
grow in terms of assets held by their members. There
is a clear correlation between larger schemes and
lower charges.
However, while underlying single fund charges
may continue to reduce due to economies of
scale, the downward trend in default investment
charges may slow, as defaults continue to invest in
a more diversified range of assets. It is increasingly
recognised that the funds with the lowest charges
do not necessarily give the best returns. Private
market funds, for example, often have higher charges
than more traditional DC investments but have been
highlighted by the UK government as having the
potential to deliver better long-term returns.
Bottom decile
0.14%
Upper decile
0.50%

Lower quartile
0.23%
Upper quartile
0.39%
Median
0.28%

0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
We Asked Schemes What Charges Were Paid
by a Member Invested in the Default Option:
3Five Steps to Better Workplace Pensions
35

36. Integration of Illiquid Investment in DC Schemes
Traditionally, DC investment strategies have been based around
liquid assets, primarily equities and bonds. However,
as long-term investors, DC schemes could benefit from
exposure to more illiquid assets, such as infrastructure
and private equity.
There has been significant interest from the UK government
in encouraging DC schemes to invest in illiquid assets. In his
Mansion House speech on 10 July 2023, the Chancellor of
the Exchequer announced that several of the UK’s largest DC
providers had signed up to the ‘Mansion House Compact’ —
committing to the objective of allocating at least five percent of
their default funds to unlisted equities by 2030.
AON EXPLAINER
Illiquid Assets
Typically in terms of DC pension investments,
illiquid assets fall into one of four categories:
1. Infrastructure
Investment in large-scale social (e.g., hospitals),
economic (e.g., ports, toll roads) and renewable
projects (e.g., wind farms) that are necessary
for economic activity. They may or may not have
government support/partnership.
2. Private Equity
Investment in equity of companies that
are not on a public exchange. Can be equity
for early (e.g., venture) or late stage (e.g.,
buyout) companies.
3. Private Debt
Corporate lending to small and medium sized
enterprises (SMEs). Primarily, but not exclusively,
to private equity backed companies.
4. Real Estate
Generally involves the purchase of retail, office,
industrial or residential buildings.
3Five Steps to Better Workplace Pensions
36

37. EXPERT VIEW
Chris Inman
Partner and Head of
DC Investment Practice
Aon is supportive of true diversification and
investing with ‘best of breed’ managers that help
improve member outcomes. Private markets have
a role to play in this but are not a homogeneous
group of assets. That is, we need to be careful
to first understand what we are trying to achieve
for DC savers, before committing capital to
strategies that have long lock-up periods and
sporadic liquidity. This is a relatively new area for
DC investing and there are no prizes for jumping
in to be first. We must remain focused on what
we are trying to achieve for DC savers and the
investments that will best help us to get there.
Illiquid investments are likely to be a
major focus for DC over the coming
years, but our findings show that there is
still significant uncertainty — and limited
knowledge — about their role. Only ten
percent of respondents said their scheme
is currently invested in illiquid assets,
while a further 26 percent are considering
investment. 39 percent said that investing
in illiquid assets is not being considered
and 25 percent do not know — showing
that despite the government drive,
uncertainty remains.
Using illiquid assets can help
improve member outcomes, but their
most significant role could be as a
diversification tool that offers wider
access to markets. Benefits can (but
are not guaranteed to) include lower
correlation to equity markets, inflation-
linked returns and illiquidity premium to
potentially improve long-term returns and
ultimately pension outcomes.
3
Is Your DC Scheme Considering Investment in Illiquid Assets?Five Steps to Better Workplace Pensions
37
Already invested in
illiquid assets
10%
Yes, this is under
consideration
25%
No, this is
not under
consideration
39%
Don’t know
25%

38. 12345
3Five Steps to Better Workplace Pensions
38
Five Steps to Better DC Investments
Consider your default
investment. Is it suitably
diversified for optimum
growth and acceptable
volatility levels, and does
it reflect the needs of your
DC plan members?
Understand and set
long-term return targets
for your default to aim
to deliver an adequate
outcome at retirement.
Consider how you monitor
investment performance.
Understand aggregate
returns against your targets
as well as individual funds.
Review your ESG
principles — do these
align with the sponsoring
employer; are they being
met on an ongoing basis
and have you considered
members’ views?
Understand developments
and options in private
markets and other illiquid
investments — consider
learning more about
whether any of these
options could be suitable to
improve outcomes for your
scheme members.

39. Five Steps to Better Workplace Pensions 39
4
Engagement and
Wider Financial
Wellbeing
Achieving a good outcome at retirement
can rely heavily on DC savers making
appropriate choices, but with so much going
on day-to-day, it can be difficult to direct
savers to focus on pensions and raise levels
of understanding to facilitate good decision
making. Good engagement is crucial to
ensure people make the right choices.
To achieve this we need to ensure that
the right messages are being delivered
to the right people at the right time and
in the right way.
At Aon, we believe that effective DC plans should recognise
diverse employee needs and perspectives. They should promote
flexibility, choice, and financial wellbeing to support members
in making the best financial decisions. Communications should
use a multi-channel approach where possible and be targeted
to ensure they are relevant to the recipient and prompt
appropriate actions.

40. 4Five Steps to Better Workplace Pensions
40
● Three-quarters of DC schemes provide wider financial support
outside of pensions, or plan to provide this in the next two years
● Schemes are generally good at targeting communications, with
factors considered including term from retirement (56 percent),
current savings rates (49 percent) and equity, diversity and
inclusion (30 percent)
● Only 14 percent have no plan for communications
● Offering an employee share scheme is around twice as popular
as workplace ISA (40 percent compared to 22 percent).
A further 18 percent plan to offer additional non-pension
workplace savings in the next two years
Key Findings

41. How DC Schemes Encourage Employees to Save at Appropriate Levels for their Retirement?
Engagement and Wider Financial Wellbeing
The most popular current method used by schemes to
encourage employees to save more is to use a matching
contribution design, with 58 percent adopting this
type of approach and a further seven percent
considering offering this.
A large proportion of schemes communicate the level
of fund or pension income needed for a comfortable
retirement or are planning to do this over the next
two years. More schemes approach this using average
targets, such as the Retirement Living Standards
from the PLSA (46 percent), rather than using targets
based on individual data (32 percent).
Interestingly, 41 percent communicate how much
employees would typically need to save for a
comfortable retirement. While this information is likely
to be welcomed by savers, it has historically been
challenging to provide a figure as there are many
dependencies, such as how much an individual has
already saved, how long until they plan to retire and
how they access their savings in retirement.
Providing financial wellbeing support is the most
popular area for future development, with around one
in three planning to do more over the next two years.
Financial aggregation tools such as Aon’s
Well One Money have raised the bar in relation to
helping individuals understand their financial position
in totality, pensions included.
A significant proportion of respondents (28 percent)
are planning to provide targeted communications or
financial education materials based on gender, age,
or other demographics, in addition to the 45 percent
already doing this. This can include considering
DC savers through a behavioural lens, with research
showing that people’s inbuilt attitude to money is
a key driver in their financial decision making.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Provide wider support with
financial wellbeing to help
employees build a holistic
picture of their finances
Provide targeted education
or communication materials
based on gender, age,
or other demographics
Communicate how much
employees typically need to
save per year to accumulate
adequate retirement savings
Communicate the level of fund
or pension income needed for
a comfortable retirement —
based on individual data
Communicate the level of fund
or pension income needed for
a comfortable retirement —
based on average targets
Use plan design anchors,
such as company matching,
to encourage higher savings rates
58% 46%
29%
32%
24%
41%
28%
45%
28%
32%
43%
7%
● Already offer ●  Plan to offer in next two years
44Five Steps to Better Workplace Pensions
41

42. EXPERT VIEW
Karina Klimaszewski
Partner
Jenny Swift
DC Market Specialist
A focus on financial education, including pensions, as part of a
financial wellbeing programme continues to gain pace, and is now
starting to become a core tenet of an overall wellbeing strategy.
While this progress is to be applauded, employee engagement with
pensions continues to be a challenge. To help overcome this, I have
worked to develop tailored and segmented educational sessions,
which better reflect the needs of specific groups, making online or
in person sessions as relevant as possible. These have been getting
great feedback and help individuals feel empowered to take better
financial decisions in the short term and with their pension planning
over the longer term.
At Aon we believe supporting DC savers with their wider finances is
key to improving their engagement in their pension scheme. This not
only means they can plan holistically for their retirement, but it also
gives them a better chance of saving for the long term once their
immediate financial priorities are met.
Our DC Solutions, such as the Aon MasterTrust or Group Personal
Pension, offer holistic financial support with built in Life Stage
sessions offering guidance on financial matters appropriate to the
stage of the member’s career. For example, younger members are
given support around paying off student debt and saving for their
first home, alongside the importance of saving for a pension early
on in their career. Our Well One Money technology then helps them
bring their finances together in one place and also helps them save,
by analysing spending against set budgets and highlighting relevant
discounts on products from well-known brands. Going further — our
Money Habits financial coaching helps members to understand their
own relationship with money, so they have a better chance of taking
good financial decisions in future and ensuring they are better able to
engage in the available planning support.
4Five Steps to Better Workplace Pensions
42

43. What do Schemes Consider When Planning Their Pension Communications?
0% 10% 20% 30% 40% 50% 60%
Job role
We don’t have an overall plan
for our pension communications
Gender Pensions Gap
Behavioral factors
Equity, Diversity & Inclusion
(ED&I) principles
The most appropriate delivery channels
Current pension savings rates
Projected retirement outcomes
Term to retirement, e.g., joining company,
mid-years, approaching retirement,
at-retirement, etc.
56%
52%
49%
49%
30%
24%
21%
14%
9%
Over half of schemes (56 percent) consider the likely term
to retirement of their audience when planning their pension
communications. This can be a big help with engagement, as different
decisions that DC savers need to make will take precedence at
different stages. For example, an employee 25 years from retirement
is unlikely to want to hear about the tax treatment relating to different
methods of accessing their pension, but this may be really important
to someone who is intending to retire very soon.
Interestingly, 52 percent say they take projected retirement outcomes
into account when planning communications and 49 percent consider
current pension savings levels. These are good factors to consider
as they support tailored messages for those projected to fall below
certain thresholds of retirement outcomes.
49 percent consider the most appropriate delivery channels for their
communications, but this means over half of schemes do not. The
method of delivery can make a huge impact on whether people engage
with the messaging. Schemes should consider whether messages
go out by post or email; as part of a wider newsletter, notice board,
presentation, or webinar; or if they would be best communicated via
line managers to allow the audience to provide direct feedback and
ask questions.
Only 30 percent say they consider equity, diversity and inclusion
principles in their communications planning. This is a small increase
from 28 percent in our previous survey and it feels there is still a way
to go to make sure pension communications are accessible to all.
4Five Steps to Better Workplace Pensions
43

44. EXPERT VIEW
Andy Partridge
Strategic Communications Consultant
Inclusion is about making people feel
comfortable. Pensions can seem scary and
the language we use is therefore important.
Do you have an idea about the reading age or
numeracy level of your DC scheme membership?
Have you thought about whether non-English
communication is more accessible for some?
We have found that often, the level of
understanding for significant numbers of DC
savers is not what the employer or scheme might
expect. For example, just because an employer is
a financial institution does not mean all the staff
are comfortable with financial projections such
as pension illustrations.
Worryingly, some 14 percent of respondents said
that they have no plan at all for their pension
communications. Although this is a fall from two
years ago (20 percent), there is still a risk that
without even a basic plan in place, employees
may have out-of-date or incorrect information.
It is also less likely that employees will perceive
the DC plan as a valuable company benefit
if there is no coordinated communication to
position it in this way.
A good communications plan will set out:
●What you are trying to achieve
●What you want members to do
●How you will get their attention
●How you intend to make them take action
●How you can tell if you’ve been successful
or how to refine your approach
4Five Steps to Better Workplace Pensions
44

45. How do Schemes Measure Engagement?
Measuring the effectiveness of engagement campaigns and communication approaches
is crucial if schemes are to understand whether they are meeting their objectives and
using their resources effectively. Measurement also helps to refine and develop appropriate
strategies for the future. Ideally, that means assessing whether members act and what
impact that has on their overall outcome, as well as whether they have engaged with
the communication.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Track behaviours with other
financial wellbeing support
(eg, emergency fund savings,
workplace loans, etc.)
Monitor projected retirement
adequacy by individual
Monitor use of money
management tools / websites
Survey employees on
satisfaction or the value they
place on the support offered
Monitor use of retirement
planning tools / websites
Track behaviours in the
pension plan (eg, savings
rates, retirement age, etc.)
31%
41%
25%
44%
34%
23%
18%
27%
26%
15%
24%
12%
Our results found that while most schemes use proxy measures of engagement, such as
how many members access websites and online tools, only around 40 percent assess
whether individuals are saving enough, and whether they are on track to achieve their
retirement goals. Of these, just 15 percent measure this regularly. This is an area where
getting sight of the right data analytics can enable better decision making.
● Regular monitoring ●  Ad-hoc monitoring
4Five Steps to Better Workplace Pensions
45

46. Additional Savings Vehicles
Just 22 percent of respondents currently offer these
types of wider savings vehicles to employees, with a
further 17 percent considering offering.
Many pension providers offer these savings options as
a bolt-on to the pension plan and employers can often
secure discounts on the platform charges paid by their
employees compared to retail rates.
Workplace versions of ISAs and GIAs offered by an
employer (often by their pension provider or through
their benefits platform), can be used to encourage
employees to save for their future and improve financial
resilience by building up an accessible savings account
for short-, medium- or long-term use. They offer
flexibility in accessing funds, enabling employees
to navigate unforeseen financial challenges without
compromising their pension savings. This flexibility
can enhance overall financial wellbeing and promote
financial resilience and planning.
Employers may also offer an employee share save
scheme, whereby employees can purchase shares in the
company at a predetermined price, often at a discount.
Such schemes are often designed to encourage a
longer-term commitment from employees and align the
interests on employees with the company’s success.
Just over a third, 36 percent of respondents currently
offer employee share schemes and a further four
percent are considering offering.
AON EXPLAINER
ISAs, LISAs or GIAs
ISAs (Individual Savings Accounts),
LISAs (Lifetime ISAs) and GIAs
(General Investment Accounts)
are non-pension savings accounts.
ISAs and LISAs benefit from tax
free growth up to certain annual
savings limits.
4
Do You Provide Wider Savings e.g., ISAs, LISAs or GIAs
as Part of or Alongside Your DC Pension Plan?Five Steps to Better Workplace Pensions
46
No — not
considering
62%
No — considering
17%
Yes
22%

47. Alternative Options to Pension Contributions
It is less tax-efficient to save into a pension above the annual
allowance threshold. The annual allowance is reduced for high
earners to limit the amount of tax relief available down to a
minimum of £10,000 per year. Prior to 2023/24, there was also
a limit on the total amount of pension savings an individual
could accrue without incurring a further tax charge known
as the Lifetime Allowance. As an alternative for individuals
affected by these limits, some companies allow flexibility in
how company pension contributions are paid.
In light of pension tax changes from April 2024, most notably
the removal of the Lifetime Allowance, employers should
consider whether any changes are appropriate in relation to
their policies on DC contributions for high earners.
55%
offer cash in lieu of
DC contributions specifically
for higher earners
4Five Steps to Better Workplace Pensions
47

48. 12345
4Five Steps to Better Workplace Pensions
48
Five Steps to Better Engagement and Financial Wellbeing
Review your
communications plan to
ensure it sets out what you
are trying to achieve, how
you will deliver and how you
will measure success, as
well as thinking about the
level of segmentation and/
or tailoring of the support
that you offer.
Decide how you will help
people to understand how
much they need to save
to achieve an adequate
pension income.
Consider to what extent
your communications
reflect the diversity of your
audience and whether any
groups may be inadvertently
under-served.
Look at the bigger picture
of financial wellbeing and
think about carrying out a
gap analysis to understand
employees’ broader
financial needs.
Consider shorter-term
financial pressures on
employees and whether
alternative savings vehicles
might help navigate
unforeseen financial
challenges.

49. Five Steps to Better Workplace Pensions 49
5
At Retirement
Through automatic enrolment, many people
are defaulted into pensions savings and can save
at the default contribution level into the default
investment option right up until the default
retirement age. Employers and schemes often
work hard to design these defaults and, in many
cases, they can deliver a good outcome for
members. However, at the point of retirement, a
DC saver must make their own decision on how
to access their pension savings and, without
the right type of support, many will find this
extremely difficult.
The government is currently consulting on new legislation to
require schemes to offer greater support for members at retirement,
including potentially a default decumulation vehicle, i.e., an
arrangement linked to the DC plan that allows DC savers to draw
their savings in retirement.
We asked schemes about their current retirement processes and
support and what changes they are planning.

50. 5Five Steps to Better Workplace Pensions
50
● DC schemes are recognising the need to support savers with retirement
decisions, but there is some disparity on what type of support is offered:
○ Most (81 percent) offer retirement planning tools
○ Around half of respondents (54 percent) provide pre-retirement
workshops for members with another 20 percent planning to offer these
○ 35 percent of respondents currently have a preferred financial adviser
firm to support members at retirement, with a further 15 percent
planning to do so
● Default retirement ages are most commonly age 65 despite the increase
in state pension age
● Most DC schemes report that less than ten percent of members have
selected their own target retirement age, although 40 percent of
respondents do not measure this
● Over six in ten schemes have a drawdown option for members, but
25 percent still have no plans to offer one, despite most basing their
default investment on their members accessing savings in this way
Key Findings

51. What is the Default Retirement Age for Your Plan?
At Retirement
DC schemes set a default retirement age for members
who do not specify their own target age. While there
is no requirement for members to access their savings
at this age, it will impact communications, such as the
figures shown on member benefit statements as well
as how DC savings are being are invested for members
using a lifestyle or target date investment approach.
A surprisingly large proportion of respondents said that
their scheme uses the State Pension Age (SPA) as the
default retirement age. In practice, this would mean
that different groups of members would have different
default retirement ages at monthly intervals between
ages 66 and 68, depending on their date of birth. There
are very few DC providers and administrators that
facilitate this, so it is more likely that these schemes
actually used a fixed age which is based on either the
current or a historic SPA.
For those confirming that they use a fixed age, the most
popular choice is the historical SPA of 65. We would
encourage schemes to check their actual experience of
when members are retiring and/or to seek views from
members. Historically, most DC members have taken
benefits well before SPA, but as DC savings become
more of the mainstay of retirement provision, this could
be changing.
0% 20% 40% 60% 80% 100%
Over
65
Age 65
Under
65
5%
86%
14%
5Five Steps to Better Workplace Pensions
51
Fixed Age
58%
State Pension Age
42%

52. AON EXPLAINER
State Pension Age
Current legislation means that the age in which an individual is able to start claiming their
state pension will be dependent on their date of birth as summarised below.
Date of Birth State Pension Age Under Current Plans
Between 6 October 1954 – 5 April 1960 Age 66
Between 6 April 1960 – 5 March 1961 Between ages 66 and 67
Between 6 March 1961 – 5 April 1977 Age 67
Between 6 April 1977 – 5 April 1978 Between ages 67 and 68
From 6 April 1978 onwards Age 68
The government has stated it is not planning to revise the existing timetables for the rise in
the State Pension Age from 66 to 67. However the timetable for the increase in the State
Pension Age from 67 to 68 could change as a result of a future review. Before any future
changes could become law Parliament would need to approve the plans.
5Five Steps to Better Workplace Pensions
52

53. 0% 10% 20% 30% 40% 50%
Don’t know
More than 50%
25–50%
10–25%
Less than 10%
39%
14%
5%
1%
41%
What Proportion of your Pension Members Have Selected an Alternative Retirement Age to the Default?
The findings show that most schemes have only a small
proportion of members selecting their own retirement age, or
do not hold information on this.
Choosing when to access DC savings is one of the five key
decisions for individuals in DC pensions. This means that
measuring the numbers selecting their target retirement age
can be a useful factor to help track levels of engagement and
understanding among members.
5Five Steps to Better Workplace Pensions
53

54. Supporting Members at Retirement to the Default?
0%
20%
40%
60%
80%
100%
Allow members to
access Pensions
Advice Allowance to
pay for financial advice
Access to
a preferred
financial adviser
Access to an
annuity broking/
retirement guidance
service
Access to
pre-retirement
workshops
Retirement
planning tools
81%
10%
55%
19%
53%
13%
15%
9%
35% 37%
Accessing pension savings at retirement is one the most crucial steps in a member’s retirement journey.
For many this could be the most difficult financial decision they ever take and making the ‘wrong’ choice
can have significant impacts. We wanted to understand how DC schemes are supporting members as they
approach retirement.
Almost all respondents provide retirement planning
tools (81 percent) or plan to do so in the next three years
(ten percent). This is positive to see, however, this relies
on members being engaged enough to access those
tools, understand how to use them and then to take
appropriate decisions based on their findings.
Another popular type of support is the provision of
pre-retirement workshops (55 percent) — this also
shows the largest expected growth area out of all the
support types surveyed, with an additional 19 percent of
schemes planning to introduce these. This trend goes
hand in hand with the rise in wider financial wellbeing
support that companies are looking to provide for their
employees. More employers are putting in place a
package of targeted financial education seminars and
bespoke financial coaching for employees, covering
both pensions and wider financial wellbeing across
early, mid and later career (see chapter four for more
information on this).
5
● Currently offer ●  Plan to offer in next three years
What Types of Support Do You Offer to Members at Retirement?Five Steps to Better Workplace Pensions
54

55. A large number of respondents (53 percent) provide
a retirement guidance or annuity broking service or
plan to introduce this type of service within the next
three years (13 percent). Some of these services have
been in place for many years and have not always
kept up with the way people now access their pension
savings, so it is important to ensure they are kept
under regular review.
Over a third of schemes (35 percent) go beyond
generic guidance by providing access to a signposted
financial adviser. In some cases, this advice is paid-
for or subsidised by the employer or scheme, but more
commonly the member meets the cost of financial
advice themselves. Typically, members still benefit from
significantly reduced advice rates and the due diligence
undertaken on appointment of the adviser, as well as
ease of access.
Interestingly, only 37 percent of schemes allow access
to the Pensions Advice Allowance, which could help
members meet some or all of the advice costs directly
from their pension fund.
EXPERT VIEW
Richard Cook
Associate Partner
The use of ‘defaults’ in DC plans has generally
done a good job in getting people saving at
a basic level in their DC pension through to
retirement, without them needing to have a
deep understanding of their pension — i.e., via
auto-enrolment on joining the scheme, being in
the default investment strategy and paying the
default level of contributions.
At retirement, however, currently there is no
default option. This was effectively an intentional
policy, with the introduction of Pensions
Freedoms allowing savers choice around how
they take their DC benefits. This means greater
responsibility is placed on the individual and a
sub-optimal decision could end up costing them
tens of thousands of pounds over the course of
their retirement.
This is a big driver for pension schemes to put
in place effective support for members in their
run-up to retirement (typically starting between
the age 50 or 55). It is good to see from the
survey responses that a fairly large proportion of
schemes have different types of support in place.
Good member support is crucial to reduce the
risk of DC members undoing years of good
work by making bad retirement decisions.
Schemes should think about having support
in place such as education sessions, online
tools and signposting to a financial adviser to
engage and support members in considering
the right retirement options. Having a default
decumulation option seems like a good step to
protect those genuinely disengaged members
from making poor decisions, but having quality
support through retirement will maximise the
chances that most members make their own
informed choices for better outcomes.
5Five Steps to Better Workplace Pensions
55

56. DC Decumulation
Signposting members to a decumulation solution, most likely a flexible drawdown solution, that has been subject to due
diligence by the scheme and/or sponsoring employer, could benefit many DC members. As well as helping to protect
unadvised members from scams or poor decisions, signposting a specific provider gives an opportunity for schemes to
negotiate lower fixed charges and streamline the transfer process to improve the member journey and potentially reduce
any investment transition costs.
AON EXPLAINER
DC Decumulation Requirements
In November 2023, the Government published its
response to a DWP consultation, ‘Helping Savers
Understand Their Pension Choices’, which confirms that
it intends to place duties on pension schemes to offer
a range of different decumulation products and services
that are suitable for their members.
The proposal is that at the point members take their
benefits, they should be offered:
●A suite of decumulation products (used to convert
pension savings into a retirement income e.g., an
annuity or drawdown) and services of an appropriate
quality and price.
●A generic default option, based on the general profile
of the scheme’s members; members will be placed into
this default unless they opt for something different.
The government has said that it will legislate at the
earliest opportunity to impose these duties, and when
parliamentary time allows. In the meantime, the DWP
will work with TPR on interim guidance for trustees of
pension schemes on DC decumulation to show how
these policy objectives can be met.
0% 20% 40% 60% 80%
With a third-party broker/adviser
Other
With an external master trust
Outside of scheme with
our current DC provider
Within the scheme with
our current DC provider
61%
20%
12%
4%
3%
Currently
offer
63%
Plan to offer in
the next 3 years
12%
No plans to offer
26%
5
Do You Currently Offer or Plan to Offer a Preferred Drawdown Solution for Members?Five Steps to Better Workplace Pensions
56

57. Approaches to supporting members with drawdown once
they reach retirement are still evolving, albeit things are
moving fast and will move faster still given the government
consultation described above. Around three-quarters of
schemes surveyed say they currently offer (63 percent), or
plan to offer (12 percent), a drawdown solution for members.
Most existing solutions use the drawdown arrangement offered
by their provider within the scheme (61 percent) or via an
external drawdown product from their existing scheme provider
(20 percent) or a master trust (12 percent).
It is important for schemes and employers to review these
drawdown options to ensure they continue to provide good
value. Not least because it is likely that DC savers will assume
that checks are being carried out on their behalf.
EXPERT VIEW
Maddie Cain
Associate Partner
The government proposal is that DC schemes
will need to offer a set of decumulation options
by ‘default’ that members will be opted into. This
approach will also allow innovation such as
CDC decumulation. Schemes can do this either
directly by making the provision in-scheme, or
through a partnering arrangement, such as a
master trust, that can provide these options. In
the meantime, the government is encouraging
employers and schemes to voluntarily develop a
decumulation offer and/or enhance their current
services. If we start to think about these things
now, it will be less of a rush later, and it will allow
schemes to get the building blocks in place.
Value for money assessments can be considered
for decumulation in the same way they currently
are for accumulation, using factors such as:
● Investment performance, beyond the point a
pot is accessed, by reference to risk
●The value delivered by the suite of products
offered to members and the value brought to
retirement outcomes
●The quality and impact of schemes’
communications and member support, in
preparing for access to pension savings,
achieving it, and in the post-retirement phase
For me, the focus must be on a holistic
assessment of value, not cost alone. We are
already seeing the desire to provide better
decumulation options for members acting as
another driver to reviewing the entirety of the
DC provision, for example considering moving to
scheme types that offer this as standard, such as
some of the master trust providers.
5Five Steps to Better Workplace Pensions
57

58. 12345
5Five Steps to Better Workplace Pensions
58
Five Steps to Better At Retirement Decisions
Assess your default
retirement age — is this
still appropriate and do
your members understand
how it could impact their
pension saving?
Review your current
retirement support — do
you have an effective,
cohesive framework of
support in place?
Consider solutions such
as IFA advice to avoid risks
of bad member decisions
at retirement.
Take steps to understand
what the new duties in
relation to DC decumulation
will mean for you and your
members, identify what
additional measures you
will need to put in place.
Consider how the new
requirements for a
decumulation solution
may impact your
longer-term strategy.

59. Five Steps to Better Workplace Pensions 59
Appendixes – Breakdown of Respondents
Respondents by Scheme Size
Number of DC Members
0–250
12%
501–1,000
15%
1,001–3,000
21%
3,001–5,000
7%
5,001–10,000
13%
10,001+
22%
Do not know
2%
251–500
8%
Respondents by Scheme Size
Total Assets
0% 5% 10% 15% 20% 25% 30%
Don't know
£1bn+
£501m–1bn
£301m–500m
£101m–300m
£51–100m
£21–50m
£0–20m
10%
16%
11%
26%
7%
10%
11%
8%

60. Breakdown of Respondents
Respondents by Sector Respondents by Role Five Steps to Better Workplace Pensions
60
Construction
3%
Education
3%
Energy
9%
Finance and
accounting
21%
Chair of trustees
11%
Independent trustee
5%
Member-nominated
trustee
7%
Sponsor-appointed
trustee
5%
Secretary to trustees
4%
HR Director/Manager
7%
Reward/Benefits
director/manager
14%
Pensions
director/manager
29%
Finance
director/manager
2%
Other
13%
Independent Governance
Committee member
2%Real estate
1%
Media/marketing/
advertising/PR
and sales
2%
Medical and health services
1%
Manufacturing
12%
Legal
3%
IT and telecoms
5%
Hospitality and leisure
2%
Retail
4%
Transportation
and distribution
4%
Other
30%

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