UK DC Themes & Opportunities for 2026 

At the heart of the UK DC pensions reform is the drive to adopt a more holistic and standardised assessment of the value being delivered to members. The Pension Schemes Bill highlighted the measures we can expect that will implement a framework to assess, compare and ultimately improve value delivered by all workplace DC schemes. 

While some of the detail is yet be specified, we already have a strong indication of what’s likely to be included in the final requirements and can begin planning accordingly. 

• Begin reviewing and enhancing governance, data collection and reporting processes to plan for forthcoming Value for Money disclosure and assessment requirements.
• Review Mercer’s 2024 DC MOT report, which highlighted the ways DC schemes can evolve their strategies to stay competitive, cost-effective and focused on members’ needs.
• Closely monitor regulatory updates and ongoing consultations surrounding Phase Two of the government’s pensions review and be ready to adapt strategies proactively.

The Investment Association’s latest survey highlighted how UK workplace DC assets also continued to grow as a proportion of pension fund assets, rising to £650bn in 2024, a 40 per cent increase since 2019. We’re familiar with this stellar growth in the scale of aggregated DC assets but the many inefficiencies driven by the fragmented nature of the UK’s DC landscape is now firmly in focus for the government and regulators. 

There’s clearly a strong link between our first and second themes with government and regulatory bodies aiming to improve saver outcomes and unlock investment in a broader range of assets, including private markets and productive UK assets.

Achieving scale through consolidation offers the potential to reshape the DC landscape by creating larger, more sophisticated schemes capable of delivering enhanced member outcomes. Scale enables access to innovative investment strategies, particularly in private markets, which can offer diversification and potentially higher returns. However, it requires careful management of risks related to market concentration and investment challenges to ensure a competitive and robust market.

• Develop clear policies on investment strategy, particularly regarding long-term and private market assets, considering the government’s productive finance focus.
• Prepare for potential scheme consolidation pressures by evaluating scale and operational efficiencies, considering Master Trust options if appropriate.

The UK’s ageing population means a growing cohort of retirees who rely increasingly on DC savings for their income. We’re now over 10 years into a post pensions freedoms world with lots of positive progress evident but it has also highlighted how flexibility and choice alone are not sufficient. The importance of providing guidance and answering the question of how much is enough? is increasingly being highlighted. This is at the heart of the government’s desire to introduce guided retirement solutions that help members navigate complex decisions around decumulation and make more informed choices about how they access their DC savings in retirement.

Figures from the FCA highlighted how approximately 48% of all DC pension pots are cashed in entirely on first access¹, when leaving some funds in the pension might have led to better returns and a lower tax bill.

While the final requirements for any default retirement solutions are expected around the middle of 2026, there’s plenty of steps that DC schemes of all sizes can start taking now in preparation.

• Don’t shy away from going back to basics by arranging a decumulation training session for the Trustee or pension governance committee to build a better understanding of the relevant issues to be navigated.
• As we get further clarity on requirements for the default retirement solution, consider the pros and cons of potential different approaches (from Collective DC to investment-based and guarantee-based solutions) and what’s likely to be most suited for your circumstances.
• Explore how Mercer Retirement Services offers a comprehensive range of options to help members navigate their retirement journey more effectively.
• Get a better understanding of the path your members are on with our Retirement Readiness Index. This will enable more targeted engagement initiatives to different cohorts of members but also help inform your investment strategy. 

Technology is becoming an increasingly transformative force in the DC pensions arena, offering vast potential to improve efficiency, governance, and the member experience. With everything from Pensions Dashboards to the ability to personalise communications and even investment strategies impacted by technological advancements, it simply needs to be a key strategic consideration for all DC schemes.

The seemingly relentless rise of artificial intelligence (AI) holds the nascent promise to streamline ongoing governance and administration (e.g. automate routine tasks, detect anomalies, and enhance compliance monitoring), reducing costs and improving accuracy.

We recognize that many Trustees and sponsors may feel overwhelmed by this pace of change and the quickly evolving nature of what a best practice DC offering looks like.

• Bring greater simplicity and focus to the design and oversight of your DC pension scheme by integrating Mercer Mosaic into your ongoing governance
• Recognising that AI is no longer on the periphery of operational efficiency and member engagement, take time to consider how the next generation of AI agents can revolutionise the DB and DC pension markets
• Data analytics and benchmarking tools like Mercer Mosaic and Mercer Choice enable schemes to gain deeper insights into member behaviours and scheme performance. Explore how these insights can support more targeted interventions and better risk management for your DC scheme.