The expected future living standard in retirement provided by defined contribution (DC) savings fell for young savers in Q3, following “flat” investment returns, Aon’s UK DC pension tracker has revealed.

The youngest saver’s expected income in retirement decreased by around £170 p.a. (0.5 per cent), driven by the increase in expected inflation and a decrease in the expected future investment return assumptions post-retirement. An increase in future expected return assumptions before retirement partially offset these decreases.

However, older savers’ expected retirement income remained broadly flat over the quarter.

According to the tracker, a 50-year-old saver saw no change to their expected retirement income after weaker benchmark returns over the quarter were offset by an increase in future expected return assumptions and an increase to the state pension in April.

Short-term inflation was relatively unchanged and, therefore, had little impact on this saver’s expected retirement income, Aon added.

Overall, the tracker fell slightly over the quarter from 65.2 to 64.6, with all savers further from reaching a “comfortable” standard in retirement, following recent increases to the Retirement Living Standards.

Forty-year-old and 50-year-old savers are now expected to achieve an income in retirement that is broadly midway between moderate and comfortable standards, Aon said.

The youngest saver is currently expected to achieve an income in retirement only slightly above the moderate standard.

Aon said it was worth noting that higher inflation was also expected to lead to higher long-term salary growth for younger savers, increasing the contributions their sample savers make to their pension pots.

However, the firm explained that the immediate impact of the change in inflation expectations was to reduce the tracker values for younger savers this quarter.

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