Galvanised by the Mansion House Accord, UK DC schemes have pledged to allocate 10% of main default funds to private markets by 2030, with 5% ringfenced for UK investments. Attention to date has focused largely on accumulation, but far less on what happens next: how that pot is converted into income that lasts a lifetime. With Guided Retirement requirements arriving for master trusts in 2027 and single employer trusts in 2028, this question is now pressing.
In this paper, we present a hypothetical study illustrating the potential impact of private assets on accumulation, the income available at retirement, and how they interact with two leading decumulation frameworks, Flex & Fix and R-CDC.
Executive Summary
- Regulation is forcing a decision. New legislation will require DC pension trustees to select a default retirement income solution for their members by 2027–28.
- Private assets, and derisking speed, can drive retirement outcomes. Adding private equity and private debt to the pre-retirement portfolio can increase the size of the pot at retirement by around a quarter, more than any adjustment to the glide path's derisking pace achieves alone.
- The benefit persists across different decumulation approaches. Both Flex & Fix and R-CDC frameworks showed comparable improvements from private asset inclusion at the median, and, notably, an even larger proportional benefit under weaker market conditions.
- Capturing this benefit depends on strong governance and manager selection. Private assets require more robust governance, carry higher fees and demand more careful member communication than traditional investments. Performance dispersion is also considerably wider in private markets, making manager selection a more decisive factor than it typically is in public market investing.
