A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
For even more information feel free to visit the following external sites:
https://russellinvestments.com/-/media/files/us/insights/institutions/defined-contribution/what-will-dc-plans-look-like-in-2025.pdf
https://www.mercer.com/en-us/insights/retirement/defined-contribution-plans/top-considerations-for-dc-plan-sponsors-in-2025/
B] The Issue
Over half of employers believe that defined contribution pension savers need to increase their savings during the accumulation phase to secure a comfortable retirement. That is according to new research by WTW.
The Global DC Peer Study 2025, conducted by the Thinking Ahead Institute from WTW, brought together 20 leading defined contribution organisations from across Europe, the Middle East, Asia-Pacific, and the Americas.
Collectively, the funds represent over $2.2 trillion in assets under management, with participants including both public pension funds and private retirement schemes. Among these organisations, 60% of expert participants said retirement income was the biggest challenge facing defined contribution (DC) pensions over the next decade.
C] The Details
There are basically two ways how most pension plans operate:
1] With a defined contribution pension, the amount people get during retirement is based on how much the employee and employer invest in the pension and how the investments perform.
2] With a defined benefit (DB) pension, the amount people get is based on their salary and how long they’ve been part of the pension scheme. Possibly the pay-out is increased with (conditional) annual indexation during build up and pay-out phase.
“In many parts of the world, DC is now the dominant pension system. Yet it is still quite young and hasn’t fully matured – meaning there are challenges like retirement income, and uptake and the level of contributions,” said Tim Hodgson, co-founder of the Thinking Ahead Institute.
These challenges are especially pronounced in regions where minimum contribution levels are low or where auto-enrolment is widely misunderstood as being ‘enough by default’. Several organisations noted a growing focus on retirement adequacy – not just coverage or participation – as the next frontier of government reform and public attention.
A majority of organisations now offer soft-default pathways into retirement, but member behaviour still lags behind: many retirees engage late and tactically rather than strategically. Some organisations are trialling collective defined contribution (CDC) or hybrid options to combine flexibility with sustainable income, but these remain exceptions.
D] Capital Allocation
The study also found that alternative investments are now equal in average allocation to bonds, with both at 20% and equities making up the remaining 60%. This marks a quiet but significant shift in DC investment thinking.
While private markets bring new governance and communication challenges, the move reflects a growing belief that long-term return potential must be maximised – especially given the longer-term limitations of bond-heavy defaults.
Michael Brough, pensions specialist at WTW, commented: “We expect the Middle East region will soon follow global markets such as the UK and Australia by integrating private market assets into DC. These assets offer the potential for both enhanced long-term returns and diversification, helping members build stronger, more resilient retirement and savings outcomes.”
A strong theme across the peer group was concern that current lifecycle designs may be underdelivering, particularly by allocating too conservatively during the early stages of members’ investment journeys. Some peers are exploring time-dynamic risk budgets or even leveraged equities for younger cohorts, based on the logic that greater early risk could dramatically improve long-term outcomes.
Others are reassessing the glidepath altogether, aiming to align more closely with members’ changing capacity to bear risk. The concept of DC as liability-driven investing – similar to DB schemes – was raised as a potentially helpful mindset shift for future design.
“We are seeing a growing cohort of DC members in the Middle East and more globally who choose not to invest due to a lack of high-quality fund options aligned with Shariah principles,” said Brough. “This challenge is gaining wider recognition, and we are optimistic that continued innovation will help address this issue.”
E] Saving More
While more needs to be done to boost investment return, Hodgson said that ultimately, most comes down to the savings willingness of people themselves. “We’ve noticed a growing consensus that current DC lifecycle designs may be leaving money on the table. However, while maximising returns on investment is essential, it can only do so much.”
“In many markets, a clear majority of pension savers still fundamentally need to save more for their retirement during accumulation. While educating members can help, it is governments that will influence whether DC contributions are really sufficient to power a decent retirement for all future DC pensioners.”
As Expat Pension Holland it is our view that only a solid level of auto-participation combined with interesting tax benefits will be able to result in a solid retirement funding by occupational pension plans.
F] EIOPA’s Vision
In order to create a broader insight we always like to include the policy of EU insurance regulatory body called EIOPA about DC plans. Which is included in the following link: