Opinion: DC Default Review - Weathering the Crisis
The first quarter of 2020 saw market volatility at its highest levels since 2008, and the impact on DC schemes cannot be underestimated. At Isio, we have reviewed a sample of “off the shelf” default strategies for the leading Master Trust providers performance in Q1 2020 and over a longer three year period. It is apparent that for DC members, young and old, there has been no hiding place with falls in DC pots being around 15-20% for younger members in the growth phase, and around 8% for members closer to retirement age.
Whilst younger members still have some time to go to retirement and therefore time to recover recent losses incurred, for older members, the falls could have an impact on their retirement plans. In our paper we suggest some areas for governance committees to consider, with a particular focus on default strategies in the years leading up to retirement.