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What challenges do today’s retirement savers face?
The pension landscape is shifting towards ‘Generation DC’, where most retirees will rely solely on defined contribution savings, rather than defined benefit pensions. This generation must engage more with pension saving, particularly when it comes to financial decisions that need to be made ahead of retirement.
At the same time, we face the additional retirement challenges of savings inadequacy, declining home ownership and longer life expectancy. As a result, phased retirement options are expected to become more common. We know that for many in their 20s and 30s pensions are not a priority, due to competing financial concerns. But by the time people reach their 40s and 50s, and start thinking more seriously about retirement, it can be more difficult to build sufficient savings. At Legal & General, we aim to support people throughout their retirement journey, but recognise additional help is often needed as savers approach and move into retirement.
How do scheme members currently access and spend their pension savings?
Research from Legal & General among over-50s highlights a pressing need for far greater support and more targeted guidance. Currently, 58 per cent of those accessing pensions do so without taking financial advice or free guidance from services like MoneyHelper. As a result, many risk withdrawing funds too quickly and outliving their pension savings. Our research shows that at current spending rates, many retirees could deplete their funds by their late 70s, leaving them with an average of nine years without pension savings.
People are not taking a holistic approach to retirement planning. Our research shows one in seven view their tax-free lump sum as an unexpected financial bonus rather than part of their long-term savings. Additionally, 14 per cent of those who have withdrawn cash from their pensions later regretted doing so.
Many fail to understand the long-term financial impact of taking cash and tax-free lump sums out of their pension plans; be it tax implications, potential loss of state benefits, missed investment growth, or the impact of higher charges when transferring workplace pensions into retail products.
What can be done to ensure savers make more informed retirement decisions?
Pension inertia remains high, but while people may be reluctant to engage with complex financial products, they are more open to discussing broader retirement plans. Encouraging people to visualise their retirement — where they might go on holiday, how they’ll spend free time, or even potential care costs in later years — can help them better assess future spending needs and how this might be funded.
Legal & General’s Digital Guidance Retirement planner supports this approach by helping members take a holistic view of their finances. Retirement is about more than just pensions; this tool encourage members to also look at ISAs, other investments, and housing needs. For instance, will they still have a mortgage or be renting beyond state pension age? This is an interactive approach, with guidance and signposting tailored to user based responses.
This planner is available to all DC members, and has been very well received since its launch last year. A key reason is its use of plain language. Many struggle with pensions jargon, so instead of ‘annuities’ or ‘drawdown’, we refer to ‘guaranteed income payments’ and ‘keeping your pension invested’—terms that are easier to understand.
Tools like this can be even more effective when the regulator introduces targeted support, such as the pensions dashboard. Legal & General has championed this approach as it will allow us to provide more personalised assistance, helping members make informed decisions, leading to better retirement outcomes.
What role can technology play in driving better member outcomes?
Technology is already improving retirement planning with tools like the Digital Guidance Retirement Planner. The future will bring further advances, including pension dashboards and Open Finance initiatives, enabling individuals to view all their savings and investments in one place.
Technology can also help retirees make better decisions through smart nudges. For example, if someone initiates a pension withdrawal, a nudge could warn them if their withdrawal rate is unsustainable and encourage them to reconsider.
Other innovations include auto-escalation during the accumulation phase. We’re also seeing technology being used to engage members more effectively through social media, short videos, and podcasts. Today’s savers don’t want to read 20-page pension booklets — if they ever did.
Finally, technology is making pensions more inclusive. AI-driven services can translate information and videos into multiple languages, ensuring better accessibility for diverse member groups.
By embracing digital tools and plain language communication, the pensions industry can help savers make informed decisions and secure a better financial future in retirement.
Find out more https://am.landg.com/en-uk/institutional/capabilities/defined-contribution/retirement-solutions/
TO DOWNLOAD A COPY OF THE CORPORATE ADVISER MASTER TRUST AND GPP DEFAULTS REPORT CLICK HERE
