The average size of defined contribution (DC) pension pots has hit £15,000 – the highest level since the introduction of automatic enrolment – according to new research from the Pensions Policy Institute (PPI).
The latest edition of the institute’s DC Future Book shows that the median pot size jumped from £12,700 in 2023 to £15,000 in 2024, indicating the increasing maturity of the DC sector.
As well as reflecting the expansion of coverage due to auto-enrolment, figures have been boosted by strong investment returns, the PPI said – particularly from listed equities. The MSCI World index rose by around 87% in the five years to the end of March 2025.
Total assets across all DC savers reached £1.2trn last year, up from £324bn in 2015.
Auto-enrolment has seen 11.3 million people brought into pension saving by June 2025, the PPI’s data showed, with 2.6 million employers participating. Just over one million people have been re-enrolled, having previously opted out.
However, 11.8 million remain ineligible for inclusion. The Pensions Commission, relaunched this summer, will explore how to broaden inclusion in pension saving to help low earners and those with multiple jobs save for retirement.
Diversification and private markets
Meanwhile, on the investment side, the PPI’s data showed how master trusts and contract-based DC pension schemes adapt their asset allocations between their growth and derisking phases. The data showed that schemes are heavily invested in listed equities for the growth phase, before transitioning towards government and corporate bonds as members near retirement.
Master trusts are typically more diversified, with 13% invested in alternative asset classes, while contract-based DC schemes allocate just 1% each to private equity, infrastructure, and private debt and 5% to real estate.
There are signs that this investment story could be changing, however. Recent data from the Association of British Insurers (ABI) indicated that £1.6bn has been invested in private equity, in alignment with the 2023 Mansion House Compact, with exposure within DC default funds rising to 0.6%.
On top of this, 17 pension providers signed the Mansion House Accord earlier this year, pledging to allocate 10% of their default portfolios to private markets, half of which will go to UK investments, subject to an appropriate supply of investible assets. Just this week, the government announced another initiative, dubbed Sterling 20, involving 20 organisations pledging to collaborate on domestic and regional investment programmes.
Decumulation choices
Annuity sales are increasing steadily, the PPI found, with ABI sales data showing that 90,000 were sold in 2024 – up from 54,000 in 2022. More than 140,000 drawdown arrangements were opened last year, with a total value of £11.6bn.
At the same time, full and partial withdrawals have also increased.
In the 2023-24 financial year there were 296,000 full withdrawals, up from 273,000 the previous year. The number of partial withdrawals rose to 302,000, from 285,000 a year earlier. Nearly 150,000 pots were fully withdrawn in the first half of the 2024-25 financial year, the PPI found, meaning this year could reach 300,000 pots fully withdrawn.
The Pension Schemes Bill contains provisions for ‘guided retirement’, which would require all DC schemes to provide at least one default option for members at retirement.
