New rules on workplace pension communications could help improve engagement with employees and lead to better retirement decisions.
This is according to a new report from the Pensions Policy Institute (PPI) titled ‘Designing Guided Retirement Solutions: Meeting Member Needs’ and looks at how Guided Retirement solutions could play a key role in helping pension savers navigate retirement income decisions.
According to the report, schemes are likely to have limited information about members, so retirement solutions will need to be based on broad groups of people with similar characteristics to create retirement pathways that are relevant and easy for members to understand.co
PPI suggests that Guided Retirement may need to operate as an ongoing process rather than a one-off decision at retirement, allowing individuals to adapt their plans as circumstances change.
It also highlights the importance of member communications and how Guided Retirement solutions interact with existing support services, including Pension Wise, targeted support and regulated financial advice.
The research was sponsored by Now: Pensions, The Pensions Regulator, Royal London, Scottish Widows and Wealth at Work.
PPI Senior Policy Researcher and lead author of the report Mariana García Requejo says: “Guided Retirement has the potential to play a critical role in improving how individuals navigate retirement income decisions, but many questions lie ahead over its design and implementation. Competing objectives such as income security, flexibility, and simplicity present clear challenges for default solutions to meet a diverse range of member needs. In order to meet them as best as possible, it’s vital these solutions are understood as a gradual development towards a new layer of retirement support within the UK pensions system, rather than a single product innovation.
“During this crucial next phase of regulatory development, the PPI is delighted to deliver new independent insights to support informed Guided Retirement policy decision-making.”
Now:pensions director of PA and Policy Lizzy Holliday says: “Guided Retirement represents an important step forward in supporting savers at retirement but there is further work to do to enable successful delivery. The report highlights how the risks faced by DC savers at retirement interact with key policy concepts. For example, the ‘default’ nature of the solution, regular income requirement, engagement and communications. We hope this report provides useful insights for government, regulators and industry – who are working hard to turn concepts into good outcomes for all savers.”
The Pensions Regulator director of policy, pensions reform Joey Patel says: “Members need more help to turn a savings pot into a sustainable retirement income and default pension benefit solutions have the potential to make a real difference.
“We urge schemes to start preparing now by getting to know their members, improving their data and considering how they will design and implement defaults that truly deliver better outcomes for members.”
Royal London director of policy Jamie Jenkins says: “The decisions people make at retirement about their pension savings can shape their quality of life for decades. Good decisions can ensure financial security, but poor decisions could expose people to running out of money, reliant on the state for a basic level of support in their later years.
“In an ideal world, professional financial advice would be available to everyone, but this simply isn’t the reality for most people reaching retirement today. The alternative idea of guiding people through their retirement choices therefore becomes crucial, and the Pensions Policy Institute’s report provides a rich source of analysis and represents an important contribution to the debate.”
Scottish Widows retirement director Carolyn Jones says: “Individuals are now facing an increasingly complex range of decisions at retirement, as they balance longer life expectancies, rising costs and often modest pension savings. Well‑designed guided retirement solutions can play a critical role in helping people simplify the decisions they need to make about how to use their pot to provide a sustainable income. Guided retirement needs to sit alongside other support and advice to ensure people can make retirement choices that meet their needs.”
Wealth at Work director Jonathan Watts-Lay says: “Retirement decisions are complex and highly personal, and experience shows most people want support with this. A generic default pathway risks people sleepwalking into choices that don’t fit their circumstances or meet their needs, particularly as many retirees are likely to have multiple pension pots with varying amounts saved into each. The PPI’s research highlights how Guided Retirement can potentially improve outcomes; however, many members will need personal guidance to help them understand the options available and ensure they make an informed decision across all of their pensions.
“We have had a lot of interest shown in Retirement Guidance services as a means of helping individuals to understand their options prior to making any decision. This type of support, alongside digital services and tools, are likely to become best practice as Guided Retirement solutions are launched. Specialist workplace providers who can deliver tailored, high‑quality and robust retirement support at scale will be key to its success.”