The challenge our industry faces is not only getting people to save more money for retirement but empowering them to make better decisions with it, particularly when they begin turning their pension pots into an income.
This is why targeted support matters. It has the potential to span the middle ground between guidance and advice, enabling providers to offer more relevant content and options to members. It can help people understand a specific risk, recognise their options and take the next step with greater confidence.
Its role is not to replace advice, but to make support more useful for those who may otherwise do nothing. When it comes to people’s pensions, inaction carries real risk.
Our recent ‘Building Financial Futures’ report, released as part of our ‘Decades Ahead’ programme, found that around 9 million people aged 25 to 54 are still not currently on track for an adequate retirement once housing costs, income and basic needs are considered. Part of the challenge is engagement. While auto-enrolment has increased the number of people saving, it has at the same time reinforced a ‘set-and-forget’ mindset. Many people stay at default contribution levels for years, without revisiting whether this will achieve the income they need in later life.
This is where targeted support will play a central role.
L&G’s first live use case for targeted support focuses on members whose workplace pension savings are fully invested in cash. This group may face a long-term risk, with their pension unable to keep pace with inflation. Targeted support allows us to highlight this risk and provide a practical suggestion; for example, that people in similar circumstances often consider moving into their scheme’s default investment option, while making clear that the decision remains entirely theirs.
Early testing suggests this kind of support can resonate strongly when it is communicated clearly. Before it went live, we tested L&G’s targeted support communications for this cash-investment scenario and it showed strong levels of engagement: 85 per cent wanted to read the materials (vs 67 per cent industry average), 95 per cent found them easy to understand (vs 79 per cent industry average) and 93 per cent were clear on the next step (vs 81 per cent industry average). That suggests tailored, relevant communication can help close the gap between information and action.
The opportunity here is significant, but so is the responsibility.
Targeted support will only succeed if it is rooted in genuine customer need, if firms treat it with as much rigour as they do regulated advice and are disciplined about boundaries. Providers must ensure that people do not mistake targeted prompts for personalised regulated advice as this risks undermining trust. And trust is key for engagement.
Equally, targeted support should not become a way to push products. Its value lies in helping people make informed decisions, not in overwhelming them with information or steering them towards outcomes they do not fully understand.
For advisers, this should be viewed as part of a broader support ecosystem, not a substitute for financial advice. The FCA has signalled a future market in which guidance, targeted support, simplified advice and full regulated advice each have a distinct role in helping consumers get support at the right time and at a cost they can afford. This matters because with retirement people’s needs vary significantly depending on their circumstances, confidence, wealth and the decisions they face. No single form of support will be right for everyone, which is why a well-functioning ecosystem that offers different types of help for different situations is so important.
Many people will still need regulated advice, particularly where decisions are more complex, around tax or decumulation and targeted support can help them engage earlier, build confidence and recognise when they would benefit from accessing advice. This could be positive for advisers as well as consumers; better support earlier in the journey will lead to better-informed clients, clarity around when to seek advice and more appropriate referrals at key decision points. It also gives providers the ability to go further in supporting customers, helping them deliver more relevant and meaningful interventions at scale where the traditional boundary between guidance and advice has often limited how much support could be offered.
The real significance of targeted support is that it reflects a broader shift in how the market thinks about engagement. Targeted support gives providers an opportunity to reshape how people interact with pensions and their finances day to day, making support more timely and accessible for millions of savers.
