Matthew Arends

Damned be the word “geopolitical” it is not a word that means anything to ordinary people . “Geopolitical risk” may mean something to investment and actuarial gurus but what it translates into for ordinary folk  is “higher prices for the things I buy”, “lower savings” for retirement.

This is not the time for Aon to come out with this headline

Below the article which you can read without my comments (in bold!) by  following this link!

Defined contribution (DC) pension savers saw an improvement in their expected retirement outcomes in the final quarter of 2025, despite ongoing geopolitical and market volatility, research from Aon has revealed.

What does a retirement outcome mean? For me a pension is a regular inflation linked income paid till I die.

Aon’s DC Tracker rose from 71.3 to 73.4 between October and December 2025, indicating that the expected future standard of living in retirement increased compared to the previous quarter.

December 2025 seems an age away, but how does how my prospects for the next 30 years as a pensioner change with in three months?

The improvement was primarily driven by positive benchmark investment returns across major asset classes, with all saver groups seeing an uplift in projected retirement income over the period.

Younger savers benefited the most in percentage terms, reflecting both strong investment performance and higher assumed future returns, while older savers closer to retirement saw more limited gains due to reduced exposure to future return assumptions.

So what? I expect my investments to go up and how much they go up from quarter to quarter does not (or should not) impact my hopes for the rest of my life (I am 64 so I call it 30 years to make me happy!)

More broadly, Aon said DC savings proved resilient throughout 2025, with expected retirement incomes rising over the year despite a challenging backdrop marked by geopolitical tensions and market uncertainty.

Does this mean anything to the person in the street? Do we really judge our retirement by what’s happening in geopolitical tensions? If we do – pensions give no certainty at all!

Outcomes were also supported by a relatively modest increase in the Retirement Living Standards (RLS), alongside the April rise in the state pension, which more than offset higher targets at minimum and moderate levels.

I think this translates into – we don’t have the need for so much pension going forward – but I may be wrong.

However, Aon warned that the outlook remained uncertain in 2026, as renewed geopolitical pressures and rising energy prices risk driving inflation higher, potentially eroding the real value of retirement incomes and placing further strain on household finances.

I’m sorry, but I , like most people , expect my pensions to go up with pensions, why is inflation being eroded? Come to think of it, what is the promise of a pension increasing with inflation from my DC pot?

Aon partner and head of UK retirement policy, Matthew Arends, cautioned that these pressures could make it harder for savers to maintain or increase contributions.

You are telling me that I will find it harder to stay in my pension because I may not be able to afford to do so?

“The recent jump in oil and gas prices is driving another surge in inflation, which will add more pressure to household budgets,” he said.

So my retirement depends on the cost of petrol? Do I really adjust my pension contributions when we get a fuel increase?

“Understandably, people may find it difficult to maintain or even increase pension savings against this backdrop.”

He added that anticipated changes to the RLS later this year could further affect savers’ perceived position, effectively raising the bar for what constitutes an adequate retirement.

So my future is determined by Retirement Living  Standards , a guess from people who work out how much more I will need to enjoy my life?

“Any change to the RLS, particularly an increase, will require DC savers to reassess their positions and consider whether additional savings, or working longer, may be required,” Arends continued.

Does anybody think ordinary people plan for the future by comparing what they’ve no idea of with a guess at what they need for the last 30 years of their lives? 

“If earlier updates are anything to go by, positive investment returns can quickly be undone when the target standard increases, meaning many savers may feel a comfortable retirement slipping further out of reach.”

So bigger pots don’t lead to better lives then?

Over the quarter, the strongest gains were seen among mid-career savers, with a typical 40-year-old experiencing an increase of around £1,050 per year (2.6 per cent) in expected retirement income, while a 30-year-old saw an increase of around £1,000 per year (2.7 per cent).

So I should be happy with increases in my deferred pay when I’m in my forties or even better in my thirties?

By comparison, a 50-year-old saver saw a more modest increase of around £500 per year (1.3 per cent), while outcomes for those nearing retirement were broadly flat, as positive investment returns were largely offset by lower future return expectations.

Will my deferred pay have gone up only 1.3% if I’m in my fifties? What about me – I’m in my sixties? Why the variation – should I smile or look unwell over the news about what happened in the last quarter of last year.

Despite these improvements, Aon noted that older savers were still expected to be the worst-off in retirement relative to the RLS, highlighting ongoing challenges around adequacy, particularly for those approaching retirement with limited time to adjust their savings behaviour.

So people of my age are done for? Because the only way we can recover to an adequate income is to pretend not to be so old, role back the years and work into our seventies?

I don’t want to have a go at Matthew Arends for his comments. I know he is a fan of CDC where this crazy volatility from quarter to quarter doesn’t happen and where the pension payable is paid in line with CPI. Perhaps he has written this commentary on DC to get some smart arse like me to ask what in heaven’s name DC is about. It that’s the strategy, it has succeeded.

The craziness of (1) being in my 60s and  (2) seeing my pot yo yo with “geopolitical tension” tells me that (3) DC is a waste of time!