[SPONSORED CONTENT]
The Pension Schemes Act 2026 has brought focus to one of the most difficult questions in DC retirement: how to help members turn pension savings into income in a way that is practical, scalable and easy to understand. The latest Pensions Policy Institute (PPI) report (co-sponsored by Marsh) on Guided Retirement shows the need to move from broad policy ambition toward practical design. For schemes, trustees, and providers, the question is not whether members need more support in retirement, but how that support should be designed.
The Mercer Master Trust (MMT) already caters for a range of different member needs and, more recently, has been exploring how to automate elements of this support to meet the needs of the new legislation. Retirement is complex. Member circumstances vary widely. And a single, universal pathway is unlikely to serve people well.
Retirement is not a transaction
Both the PPI and MMT start from the same basic premise: retirement should not be treated as a one-off transaction. It’s a journey, and members will need different forms of support as they move through it.
The design challenge is not simply about choosing between cash, drawdown, or annuity. It is about building a pathway that reflects the realities of later life: different ages, different income needs, different health circumstances, and different levels of engagement.
“Defaulting people into pathways at retirement requires assumptions to be made. Understanding your membership well allows you to make informed and sophisticated choices around how to segment and design cohorts,” explains Stephen Coates, Head of Proposition, Mercer Master Trust. “Pot size or age alone cannot tell the full story. The challenge is to build pathways that work with partial information, simple questions and broad cohorts. The member journey should be built around what can actually be known, not what would be ideal in theory.”
Members want both flexibility and security
Another area where the MMT and PPI are clearly aligned is in recognising that members want both flexibility and security. That was echoed in research conducted by Marsh, which showed that people approaching retirement are not looking for a single ‘perfect’ answer. They want reassurance that their money will not run out, but they also value the ability to retain flexibility to support life changes. That tension sits at the heart of any product design. The most promising solutions are not the ones that force people to choose one side or the other, but the ones that blend the two, giving members flexibility early on and later-life protection further down the line.
“This is why we are opting for flex-then-fix options”, continues Coates. “It is not about inventing a completely new category of product. It is about combining familiar building blocks in a smarter way: drawdown flexibility for the early years, and a route into more secure, guaranteed income later. Members’ circumstances change. Health changes. Household finances change. That means communications, review points and the ability to adapt over time are not nice-to-haves; they are central to how Guided Retirement will need to work.”
The wider support landscape
Guided Retirement will not sit on its own. It will need to work alongside targeted support, Pension Wise, regulated financial advice, online advice, AI support, dashboards and other tools that help members make decisions.
If those pieces do not connect properly, the journey will feel fragmented. If they are connected, members are far more likely to get the support they need at the right time.
Turning direction of travel into delivery
The task now is to turn a broadly agreed direction of travel into a proposition that is automated, scalable and capable of delivering better outcomes for members. This is not just about helping engaged members; it’s about creating good outcomes for all members. The focus must now move from principles to execution: designing pathways that members can understand, putting the right review points in place, and building propositions that trustees can stand behind with confidence. It also means being honest about the limits of what schemes can know and designing around those limits rather than pretending they don’t exist.
Defaults do not need to be optimal in every case, but they do need to set a consistently good standard. The aim should be to ensure that no member is left with something inadequate simply because they did not make an active choice. A well-designed default should raise the bar for everyone, while still leaving room for those who want bespoke regulated advice to seek it. A rising tide lifts all ships.
“Eighteen months into scoping and designing our default retirement solution, it’s encouraging and reassuring to see the PPI echo and reaffirm many of the conclusions that we have reached, confirms Coates. “We are building a proposition that reflects the same practical direction highlighted by the PPI: one that is credible for trustees, useful for members, and built for the realities of retirement.”
The Pension Schemes Bill has prompted serious thought across the industry. Encouragingly, that does not appear to be leading to fragmentation around competing models; instead, the industry is converging on a broadly shared view of what a workable solution needs to look like. The consensus reflected in the PPI paper may be a sign that the sector is settling on something both workable and constructive, and that is no bad thing.
To read more articles from Mercer, visit the content hub on Corporate Adviser – here.