By Pension Police Institute & Investments Columbia Threadneedle

Columbia Threadneedle Investments has supported The DC Future Book since its inaugural publication six years ago. We are pleased to see that it has become the foremost longitudinal study of the UK Defined Contribution (DC) market we envisaged it to be.

This is a special edition indeed – it is the first time that the Pensions Policy Institute has been able to track DC market activity against the backdrop of a major crisis. Chapter 4 specifically looks at the impact of the Covid-19 pandemic on DC investment strategies, how trustees have responded and what valuable lessons can be learnt.

Over the last 18 months, market movements have been a picture of contrast. In early 2020, at the beginning of the pandemic, we saw periods of extreme market volatility impacting valuations. Through the interventions of governments and central banks many markets were then propelled back to, or even above, pre-pandemic levels. This recovery was fast paced and much quicker than that of preceding crises.

Encouragingly, DC schemes’ long-term investment horizons and diversified portfolios meant that they have been able to withstand the market volatility and protect their members, a large proportion of whom are invested in default funds. Due to the unprecedented nature of the crisis, many DC scheme trustees also did not make changes to their schemes’ investment strategies. This has protected them from investment losses and allowed them to benefit from the subsequent recovery.

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