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The PPI is an INDEPENDENT educational, not-for profit research institute. We undertake rigorous research from a neutral, long-term perspective

Reports and Briefing Notes

Investment market volatility: analysis commissioned by TUC

The Trades Union Congress (TUC) commissioned the Pensions Policy Institute (PPI) to undertake analysis of the impact of investment market performance upon the retirement outcomes for savers in Defined Contribution (DC) pension schemes. Unlike Defined Benefit (DB) pension schemes, DC schemes confer investment risk upon the member. When investments underperform this results in a poorer outcome for the member of the scheme.

Potential retirement outcomes under both known historical variations and uncertain future investment returns have been projected using the PPI Individual Model. This modelling gives a scale to the impact that the investment market may have upon an individual as a result of having to bear this investment risk. Increasingly investment strategies adopted by DC default funds are likely to include a wider variety of investments. This diversification across asset classes may reduce the spread of outcomes, but may come at a cost to an average outcome.


Chapter one looks at the impact of historical investment returns upon member outcomes. Using a standardised contribution pattern, it assesses the impact variations have on the accumulation of a pension pot. 

Chapter two explores the uncertainty which is caused by unknown future investment returns. 

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