Cost is still seen as the main differentiator between workplace pension providers, but research suggests retirement support is increasingly seem as an important factor by advisers and employers when selecting a scheme.
Research by People’s Pension found that almost half of advisers said retirement was a key element in selection, with more than a third (35 per cent) expecting this to be the biggest area of differentiation over the next five years.
The research found that when looking at the retirement experience, a third of advisers said retirement income solutions would be an important differentiator, while 24 per cent cited digital engagement and AI-enabled support as important elements. A similar percentage (23 per cent) said both guided retirement pathways and guidance, and greater personalisation would be features will set workplace pension providers apart.
But despite this future focus on retirement solutions, the research found that that majority of advisers (64 per cent) thought that workplace pension providers were currently too similar.
At present advisors still see cost as the most important consideration when selecting a workplace pension scheme. Almost six out of 10 (59 per cent) agree it is still a defining factor when businesses engage with workplace pension provider.
However, as the industry increasingly focuses on value for money, advisers appear to be taking a broader view of what constitutes value. Almost six in 10 (58 per cent) believe member outcomes and support matter just as much as cost, suggesting providers will increasingly be judged on the overall value they deliver throughout a member’s savings journey and into retirement.
The findings also highlight why advisers believe retirement support is becoming increasingly important. More than half (54 per cent) say workplace pensions struggle to generate meaningful engagement because most employees disengage from their pension until later life, while 45 per cent point to employees prioritising immediate financial needs over longer-term retirement planning.
The findings suggest advisers increasingly expect workplace pension providers to demonstrate how they can support members throughout their savings journey and into retirement.
People’s pension distribution director Stuart Reid says: “Supporting people at retirement is a very different challenge to helping them save. Automatic enrolment has brought millions of people into pension saving through a relatively simple framework, while retirement is much more individual. Members arrive with different pot sizes, circumstances, priorities and expectations of what retirement will look like.
“That diversity is one of the reasons retirement has been a much tougher challenge for the industry to crack. There isn’t a single journey that will work for everyone, particularly for providers serving millions of members from across the UK.
“Scale also gives providers an opportunity. As more members reach retirement, we’re building a much richer understanding of the choices people make, where they need support and how those needs differ across our membership. That experience can help us develop retirement propositions that better reflect how people actually want to use their pension savings.
“That’s why retirement support is becoming such an important differentiator. The providers that stand out will be those that can use what they learn from their members to give people the right support, at the right time, whatever their circumstances.”
