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The At Retirement Reckoning
Barnett Waddingham’s investigation
into the UK’s retirement landscape
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Foreword
The Labour Government must take stock of its pensions inheritance, set out its stall, and get to work. As one of the leading independent consultants on DC pensions in the UK, we conducted this research to bring clarity to the complexity. By surveying a weighty sample of British employees and self-employed individuals, we wanted to gain a deep understanding of expectations, understanding, planning, and behaviours around retirement.
We were expecting a bleak picture. We got a worse one. The stark lack of financial planning and preparedness, especially in the over 50s, made our expectations look rose-tinted. At the Rewards & Employee Benefits Association’s Wellbeing Congress 2024 (REBA 2024), it was revealed that those earning £20k or less are in a relatively good position for pensions when compared to ’traditional‘ replacement ratios. But that provides little comfort for a society aiming for flourishing retirements. By far the most damning theme in our research is the poor outcomes for those approaching and transitioning into retirement, and the vast chasm between expectations and reality. Young savers might be excused for being uncertain or under-researched, but those over 50 should have had support, guidance, and appetite to get their ducks in a row. They have not.
This report focuses on this cohort of people approaching retirement. It looks to shine a light on the scenarios that savers have found themselves in which are impeding pension planning, and highlight what can be done to help those that are ‘anxious and unplanned’ and ‘naively optimistic’ especially. There are whole areas we don’t cover from our research – this includes the 10% of UK workers who don’t plan to retire at all, largely due to financial constraints, the 22% of self-employed individuals set to work indefinitely, and the self-employed’s worse outcomes for confidence and preparedness. Our research did successfully identify notable discrepancies when it comes to gender, disability, and housing status – all of which we’ll return to in future content.
Providers and policy makers need to step up, and fast. The best time to solve this problem was a decade ago – the second best time is now. We firmly believe our observations will help move the dial and are ready to march into battle for the sake of the UK’s future.
The British pensions industry is, once again, at a critical juncture. It seems every provider, regulator, and adviser is watching with bated breath as the time bomb of UK retirement saving ticks closer to detonation. And with every new day, the likely ripple effects of the impending disaster get bigger.
The past 14 years of Conservative rule saw the pension landscape shift notably. The introduction of auto-enrolment in 2012 successfully widened the UK’s saving base and helped tackle inertia around long-term saving – but with most workers relying mostly or solely on defined contribution (DC) schemes, people are approaching retirement with far less in their pots than they need. Pension freedoms, in April 2015, then took away all guardrails which protected members from making poor decisions at the point of retirement. Increases to the state pension age have impacted people’s expectations of when they’ll retire, but reliance on 2011’s triple lock remains a drain on Government coffers. Meanwhile, more people are private renters, the cost of living crisis has decimated savings, and people’s engagement with their longer-term finances remains woefully inadequate.
Executive summary
Approaching retirement:
the planning and advice gap
In retirement: products,
priorities, and understanding
The state of the nation
6%
54%
16%
41%
Of people expect they won’t retire until they are 91 or older
Of workers (54%) who plan to retire would like to retire between the ages of 61-70
Of people over 50 expect to be retired for 16-20 years
Of workers are not confident that they will be able to retire with a comfortable income
Of 55-64 year olds don’t know how to access a workplace pension when retirement comes
Of people say their workplace pension is critical to funding their retirement
55%
41%
28%
Of people don’t know the value of their workplace pension
From those who are over 55 and are confident about their outlook in retirement, almost 40% have had advice from their pension scheme, compared to less than half this figure (19%) of those over 55s who are not confident
17% Of those approaching retirement (55-64) have a clear set of financial goals and a budget for retirement
Almost half (47%) of 55+s haven’t accessed any information, advice, or guidance about retirement
Just 30% of those under 50 with children say they’ve considered the need to provide urgent financial support to their children in their retirement planning
75%
10%
40%
22%
Of those over age 65, are under the impression that you can change your mind following the purchase of a lifetime annuity
Of people admit they fully understand the different types of annuity products currently available.
Of people would prefer a regular amount of money to come in every year of their retirement from their workplace pension
would prefer a lump sum of cash upfront to use as they wish - falling to 17% among those over 50
Who we surveyed
Methodology: Barnett Waddingham commissioned Censuswide to survey 5,032 UK employees and self-employed people aged 18+, 60% of which are over 50 and all of whom plan to retire in their lifetime. The survey was conducted in July 2024.
Our sample in detail
67%
Full time employed
25%
Part time employed
8%
Self-employed
42%
Men
58%
Women
85%
White
2%
Mixed
7%
Asian
5%
Black
30%
Disabled
47%
31%
19%
9%
8%
Of respondents have a DC pension
DB pension
SIPP/ private pension
have a private/ workplace pension but aren’t sure which type
Have no private or workplace pension, and will receive only
a state pension
62%
Parents
62%
32%
5%
Own their
own home
Rent
live rent free with
friends/ family
Generational splits are as follows:
Aged 18-26
Aged 27-42
Aged 43-58
Aged 59-77
Aged 78+
Gen Z
Millennial/
Gen Y
Gen X
Baby
boomers
Silent Generation
10%
23%
44%
23%
<1%
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The state
of the nation
How long will Britain live?
The first step to planning is knowing what you’re planning for – and Britain’s workers have mixed opinions on how long they’ll live, never mind how long they’ll be retired for. Life expectancy in the UK – at birth – is 79 years for men and 83 years for women1. When asked to predict their own life expectancy, both men and women predicted an average of 80; not far off, though of course people already working have cleared the hurdle of not dying in childhood, so their remaining years will be higher.
People with more savings and investments think they’ll live longer than those without, and while the mean age estimate is 79.7 years old, the regional fluctuations are stark. While those in the south east expect to live till they’re almost 82, those in the north east don't expect to make it to 77. These are broadly in line with Office of National Statistics realities – 82 and 79 respectively.
1www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/2020to2022
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Of Britain’s workers expect to live until they are 74-80 years old – while the same number are hopeful they will live to anywhere between 84-90 years old. Despite the ‘100-year life’ being a zeitgeist topic, just 5% of people think they’ll beat the century.
Expectations of retirement length
The critical factor in retirement planning is length of retirement – how long do people need to make their money last? Firstly, the majority of workers (54%) who plan to retire would like to retire between the ages of 61-70. With the optimism of youth, Gen Z think they’re on course to retire much earlier – stopping work at 56.
On average, the anticipated length of retirement for UK adults is 18 years. One in five (20%) anticipate a retirement of between 10-15 years, with a further 16% anticipating being retired for between 15-20 years. As retirement gets closer to reality, the length of time that it is expected to last reduces. The average figure falls from 23 years among those aged 25-34, to 17 years among those 45-54, then 15 years according to those 55-64. This figure sits at just 14 years among 65-74-year-olds.
There does remain a notable number in this older cohort that are unsure about how long their retirement is likely to last – 22% of those aged over 50, rising to more than a quarter (26%) of those aged 65-74. This raises the question – how can, and should, they plan?
Like to retire
Expect to retire
Expect to die
100
75
expected age
50
25
0
88
85
82
81
79
75
70
80
70
65
63
61
57
54
80
70
66
66
65
57
55
State
pension age
18 - 24
25 - 34
35 - 44
45 - 54
55 - 64
65 - 74
75+
What will retirement look like?
We found 87% have clear aspirations for their retirement – meaning there’s a lot of people relying on getting later life saving right! Travelling (36%) are top of the list for people when asked what they’d like to do in retirement. This is closely followed by spending more time with family (32%), pursuing hobbies (31%) and spending more time with a partner (26%).
A fifth of those aged 18-34 would like to plan to move abroad in retirement (21%), and the figure is similar among those aged 45-54 who also want to. A not insignificant 6% are entrepreneurial and want to start a business in retirement. But the reality is most haven't set financial plans to achieve those aspirations. In fact, just 15% of people have set clear financial goals and a budget for their retirement – something that is relatively consistent across all age groups except for those aged 45-54 (12%) who are the least likely to have goals.
17%
of those aged 55-64, so who are explicitly approaching retirement, have a clear set of financial goals and a budget for retirement. This is hugely worrying. It is also notable that men (19%) are more likely to have goals and a budget compared to women (12%).
Paul Leandro
Partner at Barnett Waddingham
Paul Leandro comments:
It's noteworthy that those under 50 are more optimistic about how long they are going to have in retirement - around 22 yrs vs 16 yrs. But that's because younger cohorts expect to retire early rather than live long. It's likely that some of these improved expectations are being shaped by seeing parents and grandparents living more healthy, active, and mobile lifestyles. But this also shifts the challenge - they'll need significant savings to meet these aspirations.
People are being lulled into dreams of a long retirement filled with travel, pursuing hobbies, and even a life overseas. But the life on offer may be a mirage; the aspirational lifestyle so readily on display today is most likely funded by DB pensions – a luxury which won't be there for the retirees of tomorrow. And with their hopes of retiring early too, it means that the younger generations are going to have a shorter period in which to accumulate it.
This explains the paradox that people expect to be retired for longer but simply aren’t saving or financially planning for retirement. Expectations are simply out of sync with reality, especially for older DC savers. Without a notable shift in saving patterns, many will be in for a rude awakening. Aspirations with no plans are just pipe dreams.
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The million
dollar question
Spending in retirement
A question of confidence
While well over half (59%) of respondents said they are confident they will be able to retire with a comfortable income, the proportion that are not is worryingly high. Not only do two-fifths (41%) of people reveal they are not confident they’ll have a comfortable income at retirement, just over one in 10 (11%) say they are not confident at all.
A closer look at the variations across age groups reveals 18-24-year-olds to be the most bullish – with just under one in three (30%) lacking confidence they will retire with a comfortable income. And it’s those aged 45-54 where we see the biggest wobble – just under half of this group (48%) are not confident about such an outcome. Concerningly, people with only a DC pension are much less confident than those with only a DB one – 55% confident vs 68%.
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Mark Futcher
Partner and Head of DC at Barnett Waddingham
Mark futcher comments:
A simple question of confidence paints a tale of two cities. The first, a huge cohort of British workers who are hurtling towards a retirement they don’t think will be comfortable, including half of those with retirement on the near horizon. The sad truth is many are correct; they haven’t got enough saved to live well as a pensioner. The second, a group of confident savers – but most of those are confident because of other wealth, property, or private and DB pensions. These options are simply not available to the vast majority of younger workers, which is bad news for DC savers and providers.
Sadly, there’s no silver bullet. But there are some changes that could make a real difference. Firstly, improve the auto-enrolment system, by widening who it includes and increasing minimum contributions. The aspiration should be to build a DC system that generates employees a comfortable retirement over the course of a career, without needing further wealth to survive. At the other end of the career journey, we can build confidence by helping people visualise their income and lifestyle after employment. This is going to require significant innovation and a much more robust at-retirement framework, specifically working to increase confidence in older workers that a comfortable retirement is possible for them.
Expectations of spending
Most retirements can be split into three main phases of expenditure – go go, slow go, and no go. During the first phase of retirement, spending on lifestyle and luxury reflects the post-work newfound freedom. Holiday, transport, home decorating, and personal care all see increased spending as people embrace their increased free time and ‘go go go’.
Then, the reality of ageing begins to take its toll, and people slow down. They may still spend on leisure and lifestyle, but they’ll likely also need more time to rest and mind their health. The natural conclusion of that ‘slow go’ phase is a ‘no go’ one; when health complications hit and people need care, to largely stay home, and to reduce their day-to-day spending significantly. For people financially planning for later life, these phases would be helpful when considering budgets, products, and goals. But a lack of visibility and education means British workers are instead barrelling towards retirement with incorrect assumptions of what their spending will look like.
In fact, most people expect their spending to stay the same across all key areas – lifestyle (e.g. sports, personal care, tech), transport, leisure (e.g. concerts, cinema, days out), and even holidays across the first, second, third, and even fourth decade of their own retirement. This highlights a substantial miscalculation made by people thinking about later life and could be resulting in people making poor financial decisions with their pension.
There are some exceptions. People tend to rightly predict their spending on health and care needs will increase further into retirement, and that their spend on basic food (e.g. groceries, eating in) will stay stable. Almost a third expect their spending on holidays to decrease decade by decade – but around one in five expect the opposite. The other notable trend is the level of uncertainty increases with later decades. This ties to trouble planning, but also a knowledge and visibility gap – arguably, many people should expect to be able to plan for their 90s easier than their 70s, as the later decade is a more universal experience than the earlier one.
Housing: a looming issue
Expectations for housing costs are relatively unchanged across all decades of retirement. We found around a fifth of people expect them to increase, while the same amount expect them to decrease.
Uncertainty, however, does significantly increase into later stages of retirement. While just 9% say they are unsure about what’s going to happen to their housing costs in the first 10 years, this more than doubles to 24% in the fourth decade. This trend stands even for those who own their home.
Renters have it worse. Around a third of renters (32%) expect their housing costs to increase well into their fourth decade of retirement – a troubling stat given 26% of our over 50s sample is currently in rented accommodation.
The impact of their housing situation on members is stark. We found renters are significantly less confident than their home owning counterparts that they’ll be able to retire confidently – 48% are confident vs 65% of homeowners. They are also much less likely to have financially planned for retirement – 36% have no plans, compared to 23% of homeowners.
Paul Leandro comments:
We found the majority of people expect their housing costs to remain the same or increase during retirement, and notably, around a fifth of those approaching retirement age expect their housing costs to increase. The picture for renters is especially bleak; a significant proportion of people are set to rent in retirement. This group are less able to afford day-to-day commitments such as basic food, fuel and travel, are less likely to know their expected income in retirement (26% vs 18% of homeowners), and are also found to have much lower confidence about their retirement. But even though they have less security in retirement, they are planning less. A change is needed.
What these findings also demonstrate, without a doubt, is that going forward, it’s critical that any pension calculators, income requirement measures, or retirement experts are including housing costs in their analysis for later life.
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Approaching retirement
The planning and advice gap
Planning for retirement
Pensions remain the bedrock of retirement planning, with our findings highlighting that people are reliant on their pension to fund their retirement, much more so than property, savings, or investments. Getting pension saving right, therefore, is central to the UK’s later-life financial security.
When thinking about retirement, the workplace pension is the most important financial element – 55% of people think it's critical.
48%
of workers say their state pension is critical in the funding of their retirement. This rises to 57% of those aged 55-64 and 63% of those aged 65-74. It’s also the case for 52% of women compared to 44% of men.
Despite lots of chatter in the media about ‘the great wealth transfer’, a quarter (25%) don’t consider inheritance in their retirement planning, with 30% saying they don’t expect to receive any inheritance at all.
The known unknowns
Marital status is also something too often overlooked as a key factor. Around a quarter (22%) have thought about getting divorced but not considered it fully within their retirement plan, while 40% have thought about being widowed but not included it in their retirement plan.
Our data also highlights that looking toward the broader family to their dependants, both older and younger, and their potential for financial shocks, there’s a significant lack of planning. While 30% of those under 50 with children say they’ve considered the need to provide urgent financial support to their children in their retirement planning, this is the case for just 16% of those over 50. And when it comes to their parents potentially needing urgent financial support, only one in five (25%) of those under 50 have fully considered it in their planning – and it’s the case for just 14% of those over 50.
But what’s abundantly clear is the failure of people to consider the possible and likely circumstances that will affect the money they need in retirement. Fewer than one in five (17%) of all respondents have considered the possibility of having to go into care and reflecting that in their retirement plan. We also found just 19% have considered and planned for the prospect of getting a serious illness, while a further 43% have thought about it but not included it in their retirement planning.
The age story around this comes as a surprise. Those over 50 are almost half as likely to have considered serious illness within their retirement planning compared to those under 50 (16% vs 25%). And the trend is not dissimilar around planning for care needs – 14% vs 22%.
The pension blind-spot
Despite a very clear reliance on a pension for their retirement lifestyle, we find most people haven't checked the value of that pension. Around three in five (59%) of all respondents said they could calculate the value of their workplace pension – 25% know exactly, and 34% know approximately.
While not knowing this detail is perhaps forgivable for those earlier in their career, there is a notable group who are approaching their retirement that looks like they are simply burying their heads in the sand. More than two in five (38%) of 55-64-year-olds, and around a third (32%) of 65-74-year-olds admit to not knowing the current value of their workplace pension.
Of those that said no, around a third (35%) said they wouldn’t even know how to find it – and this figure is pretty consistent across age demographics. The greater uncertainty caused by DC pensions is evident too. People with a DC pension are far less likely to know the value of their pension fund – 59% said yes vs 67% of people with a DB pension. The people most likely to know the value are those with a private/SIPP pension, at 75%. All of this helps explain the notable confidence gap.
59%
Of all respondents said they could calculate the value of their workplace pension – 25% know exactly, and 34% know approximately.
Advice apathy
This insufficient planning is worsened by a lack of advice. There are a whole host of available options to people at all ages. And yet there’s an infuriating apathy when it comes to leaning on such support – across all generations. Particularly worrying is those that need it most steadfastly refuse to take help on offer. For example, a paltry 17% of those aged 50+ have had advice about their retirement from Pension Wise, the Government’s service available for the over 50s – and it’s still only 20% of those aged 65-74. Some comfort could be taken if this 50+ group were getting good advice elsewhere – but that simply doesn’t appear to be the case. Just 19% of those over 50 have had advice from a financial adviser, and only 25% of those aged 65-74.
Among those over 50, the most popular place for getting advice is from people’s own pension schemes. But this figure is still only 29%. Other places where notable numbers of this group have received guidance are via retirement planning tools online (20%) and their employer (18%).
There is a notable trend among younger generations to lean on social media for help when thinking about later-life saving. Just under a third (30%) of Gen Z have used social media for advice about their retirement planning, and 21% of Millennials. A further significant number (39% and 38% respectively) haven’t but would in the future.
Mark Futcher comments:
Poor planning is almost as bad as not saving. Both risk retirees being left high and dry later in life. The evidence shows we’re at risk of waving goodbye to a lost generation of retirees, cut adrift by insufficient planning and not willing or able to ask for help. There is time to avert this looming crisis … but there really is no time to lose.
The industry needs to urgently engage and educate people, especially those in their 50s. It’s not just about instilling in them the importance of planning, but about making sure they have the necessary tools to do so. Pension providers are the most popular place for advice for over 50s, which means there is an urgent responsibility to offer fulsome, understandable, and targeted support.
A pension in practice
When asked what they’re looking for from their pension, a plurality of people (40%) would prefer a regular amount of money to come in every year of their retirement from their workplace pension. Almost half as many would prefer a lump sum of cash upfront to use as they wish (22%), while just under a third (30%) say their preference would be for a mix of these – a smaller regular amount of money each year, and a lump sum of cash they can use as they want. Then when it comes to their investment preferences, the majority would prefer their pension pot to grow steadily, with less volatility – 51%. The younger cohorts appear still far too cautious, with only 38% of Gen Z and 30% of Millennials saying they want their pension to grow as much as it can, even if it means greater volatility and/or risk.
Looking at their future needs when in retirement, there’s a notable split between those at the earlier and later part of their careers. Notably, those sitting in the middle (Gen X) are much more aligned with the expected requirements of their older counterparts. While across the generations, the appetite for having a regular amount of money coming in every year that they can predictably rely on sits at around 40%, it’s the attitude to cash where there’s significant variation. Around one in six (16%) of Baby Boomers and one in five (19%) of Gen X would like to receive a lump sum of cash up front that they can choose how to use and invest, the comparative figures are 27% of Millennials and 35% of Gen Z. These younger cohorts are also much less attracted to a hybrid option. The findings also make abundantly clear the need for greater education simply around the function of pensions – barely anybody understands how their pension is actually invested.
Looking at their future needs when in retirement, there’s a notable split between those at the earlier and later part of their careers. Notably, those sitting in the middle (Gen X) are much more aligned with the expected requirements of their older counterparts. While across the generations, the appetite for having a regular amount of money coming in every year that they can predictably rely on sits at around 40%, it’s the attitude to cash where there’s significant variation. Around one in six (16%) of Baby Boomers and one in five (19%) of Gen X would like to receive a lump sum of cash up front that they can choose how to use and invest, the comparative figures are 27% of Millennials and 35% of Gen Z. These younger cohorts are also much less attracted to a hybrid option. The findings also make abundantly clear the need for greater education simply around the function of pensions – barely anybody understands how their pension is actually invested.
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13%
Of people with a workplace pension have a full understanding of how their pension is invested, and could tell you about the investment choices and performance of their scheme. Around a quarter (26%) say they know a fair bit – for example, they could tell you about the investment choices but not the performance. And one in five (20%) are the direct opposite – while they could tell you about the performance, they are oblivious to the investment choices. Just under one in 10 (9%) admitted they didn’t know their workplace pension was invested at all – this is regardless of whether they’re over or under 50. Why does education and understanding matter? Because people who are confident about retirement are also more likely to know more about their scheme – 71% have a good understanding (full or fair), compared to 42% who are not confident.
Why - the scenarios in practice
We wanted to delve into the bleak picture the retirement landscape in the UK paints. We tracked our 5,000+ respondents across two core metrics – confidence and preparedness – to understand why people are hurtling towards a retirement timebomb, and what can be done about it.
don’t know what their expected retirement income will be.
Prepared
Not confident
Confident
Not prepared
To determine the number of people qualifying for each scenario we only considered those who provided a committed response to qualify. i.e. we ignored those who responded "unsure", "don't know" and "rather not say". For the Prepared scenario we only considered those with clear financial goals and not those with "a rough idea".
255 People
Ready but worried
1,492 People
Travelling well
437 People
Naively optimistic
865 People
Anxious and unplanned
To determine the number of people qualifying for each scenario we considered only those who provided a committed response to qualify. For the Prepared scenario, only those with clear financial goals were considered.
Demographic considerations
Attitudes in focus
Anxious and unplanned
Naively optimistic
100
75
50
25
0
74%
65%
52%
39%
52%
44%
33%
15%
Most likely DC only
Have under £1,000
in savings
Have nothing invested
Say state pension is critical
45%
23%
20%
16%
14%
41%
40%
32%
26%
12%
18 - 24
25 - 34
35 - 44
45 - 54
55 - 64
65 - 74
75+
Don’t know what their expected retirement income will be
Have had guidance from their pension scheme
Don’t know the value of their pension or how to find it out.
Don’t know how to access their pension, or how to find out
Of those over 65 in this scenario have sought any advice or guidance from any source
Tailor regulation to compel better support of people
The introduction of consumer duty has undoubtedly seen outcomes improve for many consumers. But an unintended consequence has also shifted the market mindset into risk mitigation. This risks providers being reluctant to innovate or drive forward change in order not to fall foul of regulation. But the irony is that this conservatism is creating a bigger risk that people aren’t getting served at all. Regulation must focus more sharply on delivering better flexibility and ultimately creating better outcomes for all.
Use the Advice Guidance Boundary Review to allow innovation and targeted support
Our research is clear; people are approaching retirement with no professional advice, helpful guidance, or even good information about their options. As such, it’s no surprise that they make poor decisions and their expectations are out of sync with reality. Digital solutions sit at the heart of this. While many people have a ‘human-first’ preference for guidance, cost is factually prohibitive. It’s simply not realistic to expect providers to recruit battalions of advisers. What is needed is low cost, efficient, and accessible digital solutions, with a reliable ‘human when it’s needed’ pathway. But the necessary innovation is often stifled by regulation, cost, and an institutional mindset that resists things that offer a threat to the status quo.
Better incentives are required to break down these barriers, and ensure that the potential offered by digital solutions is properly realised. Within this, AI needs to be used sensibly and appropriately. The Financial Conduct Authority (FCA) has an opportunity with the Advice Guidance Boundary Review to take an innovative approach. Providers, trustees, and advisers are desperate to create better outcomes for members, and being able to offer targeted support wherein savers can visualise outcomes, understand impact, and take ‘nudge’ guidance which directly correlates to their circumstances will be invaluable. A clearer set of rules will help bring about innovative digital solutions, which provide the requisite support to retirees, in a cost-effective way.
Policy implications
With the new Government planning its next five years, Barnett Waddingham is calling for three policy recommendations as a direct result of this research and the issues within the ‘at retirement’ landscape:
There is a very real need to better serve people both approaching and during retirement. That such a number are still ‘anxious and unplanned’ shows the scale of the challenge that still lies ahead.
The introduction of the ‘pension freedoms’ in 2015 saw the retirement security blanket snatched away, as there was little development to help people make the right decisions. With no guardrails, people were instead left free to careen off the track and plummet into the financial abyss. And once they do, there’s no going back.
Without regulatory intervention, we are hurtling towards a pensions timebomb. However, this doesn’t simply mean ‘more regulation’ – the current regulatory framework often isn’t helpful to providers, with too many obstacles hindering the development and rollout of innovative solutions. An overview to improve flexibility, efficiency, and member outcomes is critical.
Reform the Value for Money (VFM) system to include at retirement solutions
VFM proposals specifically preclude ‘at retirement’ solutions. This means that when Independent Governance Committees (IGCs) and Trustees are assessing value for money, their focus is fixed on accumulation products. As long as someone retains assets in a pension scheme, e.g. during drawdown, they remain a pension scheme member. This includes older cohorts. There is still a fiduciary responsibility to safeguard these members. Excluding an at-retirement focus from VFM assessments seems illogical. Another unintended consequence is that this increases the risk of people moving from excellent value, highly regulated, well governed workplace schemes in the accumulation phase, before shifting into retail schemes for decumulation, which are not necessarily right for them nor offer them adequate value for money
Furthermore, it is imperative that providers be reminded of their existing fiduciary duty to treat retired members the same as contributing members. As it stands, providers sometimes fall into the trap of largely focusing on contributing members, who are the ‘cash generators’. A firmer and clearer regulatory framework is required, one that establishes best practice for trustees to make sure retired members are much better served. Their role should be not just to house assets, but to engage and educate older members, safeguarding their interests throughout the entire decumulation period.
Think bigger than pensions
It has really never been easier to build a truly 360 view of later-life planning. With the advent and growing adoption of Open Banking and Open Finance, people have the facility to see all their assets in one place (savings/ investment/ debt) throughout the accumulation phase. But this option is rarely on offer in retirement. Providers should embrace the opportunity to demonstrate the positive and negative impact of spending choices, empowering them to take a proactive and informed role in shaping their financial future. More granular and real-time spending data also enables adviser or AI ‘nudges’ to help make course corrections if someone’s making choices that take them further from their goals.
For providers to bolster their retention figures, they need to capture hearts and minds - embedding themselves as part of the day-to-day lives of their members. Providers should take the opportunity to leverage their size to offer valuable benefits to members - for example, better rates for protection products, discounts at retailers, and offers with health and lifestyle brands. And it’s not just about finances or pensions. Providers can bring members together, digitally and in-person, creating communities where people feel that they belong and feel supported. This is particularly valuable later in life, where people can help each other navigate the challenges of later life, develop new friendship groups, and share their passions and hobbies.
Educate while innovating
As the requirement of current and potential members shifts, it is certainly important to develop and introduce a broader range of products. But without the facility to engage and educate people on these products, they risk causing more harm than good. Providers need to clearly explain the need and outcome - showing just how generating income through a variety of different products can create people’s desired results later in life.
This should also mean giving savers the big picture. Retirement often feels like something entirely foreign and incomprehensible. There are lots of variables, big numbers, and scary risks. For members currently saving, the earlier they can be given a holistic overview of their needed and predicted income at retirement the better. Understanding the nuances of income requirements is also extremely useful, i.e. how these will change over time - go go, slow go, no go.
Helping members visualise what they want, what they can achieve, what’s not feasible, and how they can get there, not only helps build confidence, but it also helps motivate and regulate saving.
Provider implications
For providers too, there is also certainly plenty of work to do - not just to address the high-risk challenges of the cohort we’ve identified ‘anxious and unplanned’, but to also properly meet the changing needs of all members. To do this, providers are going to have to work closely with the regulator and policy makers to evolve the industry.
When looking to set out their strategies and priorities for the future,
here are five things for providers to consider:
Move away from being fixated on accumulation
Providers are doing the heavy lifting for workplace savers, working hard to get members where they need to be. But there’s a growing trend when members hit their late 50s of providers losing these ‘high value assets’ to retail funds offering ‘easy consolidation’. There is a clear commercial imperative to retain these assets for longer. And helpfully, the solution is easily identifiable - engagement. But that requires a mindset shift. There needs to be a concerted effort to move away from being focused on accumulation, and a drive to helping those approaching and in retirement navigate the later period of their life with confidence.
What would the ideal digital solution look like?
The pensions dashboard is very focused on people in accumulation – but there is very clearly a need for a digital solution that meets the needs of people in retirement. What could this look like?
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Encompass all assets (open banking led).
Be able to visualise scenarios – e.g. the impact of taking cash upfront on future income.
AI-driven (guidance/ nudges/targeted support) – early intervention.
Allow for joint/household planning.
Be intuitive and easy to use.
Demographic deep dives
Thanks to the strength of our research sample, The At Retirement Reckoning is able to shine a light on the experience and behaviours of different communities in the UK. These deep dives provide a more detailed examination of our respondents based on key demographic markers.
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