Making sure people have enough money in retirement remains one of the most pressing challenges facing the UK pensions industry. Auto-enrolment and Pension Freedoms reshaped how we save and spend, but with the onus on the individual and retirement now spanning decades, significant gaps remain – particularly in helping people navigate retirement.
We stand at a pivotal moment. Yesterday’s announcement on the new Pensions Commission to tackle the barriers to retirement adequacy and the Chancellor’s Mansion House speech, combined with the Leeds Reforms, signal a renewed focus on rewiring the financial system to boost investment and make people’s money work harder. Meanwhile, the recent FCA proposals for “targeted support” could transform member engagement, drive better outcomes and boost financial confidence across the UK.
The challenges of the current system
Pension Freedoms, introduced in 2015, was transformative, giving people control over how and when to access their DC pension savings. Auto-enrolment removed friction and allowed millions to “set and forget.” But greater choice brought greater responsibility, often without the support needed to make informed decisions.
Together, these reforms created an unintended tension: people spend most of their working lives disengaged from their pensions, only to be expected to make life-defining financial decisions at retirement. Unsurprisingly, many struggle. This is against the backdrop of an adequacy crisis; the latest figures from the Department for Work and Pensions (DWP) show 15 million people aren’t saving enough.
The FCA’s latest Financial Lives survey shows just 9% of UK adults received financial advice about their pensions or investments last year, leaving the vast majority navigating complex choices alone. The consequences are clear. L&G research from earlier this year reveals that one in five people withdraw a cash lump sum as soon as they turn 55, often with little understanding of the long-term implications. Many then leave that money in current accounts or cash ISAs, missing out on investment growth and exposing themselves to inflation risk. One in seven already express regret over these early decisions, with a similar proportion fearing they’ll run out of savings before they die. Our modelling shows that unsustainable drawdown rates could see many deplete their pension pots by their late 70s, leaving potentially decades of retirement unfunded.
This is why we have long advocated for personalised, free guidance as an alternative for those who neither seek nor can afford regulated financial advice. At L&G, we’re helping members make sustainable choices and we’ve campaigned with partners like The Investing and Saving Alliance’s (TISA) to call for reforms that close the advice gap.
Could targeted support be a breakthrough in pension policy?
The FCA’s “targeted support” proposals could finally bridge the gap between generic support and regulated advice. Providers would be able to deliver tailored nudges to groups with similar characteristics, supporting savers at critical decision points – prompting under-savers to increase contributions, warning those considering poor-value transfers, or suggesting sustainable withdrawal rates.
This isn’t just support; it is a lifeline at the moments that matter most, giving people the right information at the right time.
We’ve seen the positive impact on members first-hand. Launched in late 2024, the L&G Guided Retirement Planner supports members aged 55+ by simplifying retirement decisions through a personalised, tech-driven experience. It helps builds a comprehensive plan that considers pensions, savings and property – empowering savers to identify shortfalls and achieve their ideal retirement lifestyle.
The Planner is helping to break down members’ emotional resistance to thinking about and planning for the long term, and we’ve had strong demand from members looking to access information about their retirement options.
The wider ecosystem for growth
The FCA proposals align with the Government’s ambition to rewire the financial system. The Leeds Reforms mark a welcome step toward a more customer-centric approach: banks will be allowed to alert people when their cash could be working harder, risk warnings will be simplified, and savers encouraged to invest rather than leave money languishing in low-yield accounts.
The Mansion House speech reinforces this broader vision. Pension reform, combined with a modern industrial strategy and closer collaboration between providers and regulators, offers a real opportunity to deliver stronger outcomes for savers while unlocking investment for the UK economy. The second phase of the Pension Review is building on this, laying the groundwork for further legislation.
These reforms could help people save more, invest more effectively and engage more deeply with their pensions, while fuelling national growth and resilience.
A cultural and economic opportunity
The economic benefits of these reforms are clear, but their cultural impact could be greater. For too long, pensions have been ignored until retirement. Timely nudges and guidance could create a new mindset, one where people check, adjust and plan for their future throughout their working lives.
Improving pension adequacy will not only help people have enough for retirement, but also channel billions into productive UK assets – good for savers, the economy and society. The UK has a track record of bold pension reform. Auto-enrolment and Pension Freedoms showed what’s possible. Now we must go further, and the new Pensions Commission will form part of this, helping us to get consensus, trust and stability.
With targeted support, backed by the Pensions Commission, Mansion House commitments and the Leeds Reforms, we can start to close the adequacy gap, restore confidence and build a culture where retirement planning is second nature, not a source of anxiety. We will continue to call for an expansion of auto-enrolment and the delivery of the Pensions Dashboard, which would further strengthen the system.
If regulators, providers and the Government work together, these proposals could transform the UK’s relationship with pensions for good.
