Retirement planning isn’t what it used to be. For years, the conversation centred on building a pot. Now, with the Pension Schemes Bill requiring default retirement solutions, focus has shifted: how do we turn those pots into dependable incomes? And, ensure defaults are useful, not just compliance box-ticking?
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That tension, between safety net and good decision-making, sits at the heart of the debate.
The problem with ‘people like us’ thinking
Spend long enough in proposition design and there’s a danger of falling in love with your
own creations. You build a product, polish it, admire it, then, hunt for people who need it, or want it.
People don’t arrive at retirement in neat boxes. Mercer Master Trust data shows members can approach retirement with as much as £500,000 1 of assets, yet only a third sit in pension pots. Isas, property, and investments matter. Add different lifestyles, health and ambitions, and ‘one-size-fits-all’ quickly collapses.
Defaults must acknowledge this messy diversity.
What the data tells us 2
▪ People are three times more likely to take cash at 55 than at 60 or 65
▪ 60% of pots are accessed as cash
▪ Around a third of retirement wealth sits in pots that aren’t pensions
These aren’t just stats; they show members mix and match assets to construct an income. Pensions are a component, not the whole solution. Default solutions must evolve with that reality.
Default: safety net or springboard?
Let’s be blunt: defaults are complicated. A working group we set up wrestled with the problems of longevity protection, multiple cohort models and flexibility. The conclusion? Defaults are best viewed as a last resort.
That doesn’t mean defaults don’t matter. Defaults provide a vital safety net. But if members are disengaged at such a pivotal moment, it says something uncomfortable about how the industry serves its customers.
Flex-and-fix is emerging as the favoured model, and we’re likely to see product innovation on the ‘fix’ side (longevity protection, CDC and secure lifetime income). The bigger ambition: engage members early and often so the default, ideally, never has to be used.
Targeted support: a step forward
Targeted support is generally regarded as a step forward. Segmenting members into cohorts lets us focus with more precision and reduces the scattergun approach.
But don’t overplay it. A broad cohort won’t spot that Sarah has property but no Isa, or that James plans to work part-time until 72, or that Maria needs certainty because of health concerns. Targeted support is a stepping stone, not the summit. Cohorts can only take you so far, the summit is hyper-personalisation, the ‘persona of one’. To personalise at scale, you need tools.
AI: beyond the hype
You’ve heard of ChatGPT and Gemini. They’re clever, but generalist AI agents can stumble when it comes to the detail.
What’s needed is expert AI: narrow, deep, and rigorously tested so trust is built in. We’re working closely with Engage Smarter AI who are developing a Pensions Expert AI model, which in tests, already delivers higher accuracy than generalist AI or typical helpdesks 3.
Accuracy matters. If AI is to personalise pensions, it must be trusted. And trust comes from doing the right thing for the right member at the right time.
Where we’re heading
Default retirement: hygiene factor or differentiator? Both. Defaults are essential, but not the endgame. The real edge comes from using data and technology to move beyond defaults, toward engagement, multiple defaults, smaller cohorts and, ultimately, the ‘persona of one’.
A final thought
Retirement should be personal, yet too often the industry treats it impersonally. A pot, a glidepath, a default.
By blending human advice with digital access, respecting the whole financial picture and using AI responsibly, we can make retirement planning genuinely personal.
Not quick fixes, but solutions built around people, in all their messiness and uniqueness. That’s where real differentiation lies.
