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Retirement today is far from a simple, clear-cut milestone. Instead, it’s a complex, often daunting journey filled with uncertainty and important decisions about how to turn decades of savings into a sustainable income. The trustees of the Mercer Master Trust, in conjunction with Barnett Waddingham recently conducted qualitative research, interviewing 28 pension savers aged 51 to 71 who between them hold savings in a broad spectrum of pension providers and schemes. The aim was to understand how members across the market feel about their retirement options and what they truly want from their pension providers as they approach this pivotal life stage.
This research will help inform Mercer’s response to the DWP’s Default Decumulation (Guided Retirement) directive, which mandates pension schemes to offer default retirement income solutions before the end of the decade. The findings offer valuable insights, not only for Mercer, but for the entire industry grappling with how best to support members through retirement.
Open to provider-led default solutions, but it’s complicated
One of the headline findings from Mercer’s research is that savers are open to the idea of a default retirement income solution arranged by their pension provider. However, this openness is far from uniform. Individuals’ attitudes vary, shaped by levels of engagement, understanding, and trust.
The research identified four distinct groups:
- “Isn’t this what happens already?”
A distinct group of members assumed that default retirement solutions were already in place. This group, often less engaged and less knowledgeable about pensions, found comfort in the idea of a default because it aligned with their expectations. This points to a broader issue: many members remain unaware of the choices and complexities they face, which can lead to passive disengagement. - “This idea is for people like me”
This group welcomed the default solution as a straightforward, no fuss way to manage retirement income. They expressed relief at the prospect of someone else making decisions on their behalf, especially if it meant avoiding the stress of complex choices. Their main concern was flexibility, they wanted reassurance they wouldn’t be locked into a decision they might regret. - “This would be a great starting place”
Members in this category saw the default solution as a useful benchmark or baseline. They valued having a credible, simple option to start with, which they could then compare against other possibilities or seek advice on. This group’s cautious optimism highlights the potential for default solutions to act as a gateway to deeper engagement. - “Great for others, but not for me”
The most financially knowledgeable and engaged members often fell into this group. They viewed a default solution as potentially helpful for less confident members but didn’t feel it would meet their personal needs. They desired tailored, personalised advice and were sceptical about whether a one-size-fits-all approach could truly serve their interests. Yet, even among this group, there was recognition that a default could serve as a useful benchmark.
Qualitative research has helped identify distinct groupings, but follow-up quantitative research is needed to determine the size of these cohorts. Nevertheless, it provides clear direction to the designers of these default income systems. For some groups, there is a significant gap between consumer understanding and the complexity of the decisions they need to make. This challenges providers to move beyond simple segmentation by pot size and to consider factors like member awareness and understanding.
The decumulation knowledge gap
Despite being within two years of retirement, many of Mercer’s test group struggled with the concept of a transition from saving to spending. The concept of decumulation is poorly understood. People want clear, simple, and staged explanations of “what happens next,” and practical guidance on how income starts, how it can change, and what flexibility they have.
Unfortunately, current communications, often fail to meet these needs. Bundled with annual statements, and lacking immediacy or personal relevance, they aren’t cutting through the noise. This disconnect risks leaving members confused at a time when clarity is most needed. The lesson: don’t overlook the basics!
Why how members feel matters
Financial decisions are rarely made in a vacuum. The research underscores the idea that emotional reassurance is as important as product optimisation. Members want to feel supported, not overwhelmed; confident, not pressured.
Stephen Coates, Head of Proposition at Mercer Master Trust, explains, “The research shows that the success of a default retirement solution depends largely on how it makes members feel and the trust they have in their provider. Its real value lies in reducing emotional stress and providing a safe, flexible starting point that members can accept, adapt, or even move away from. To achieve this, we must commit to early, ongoing education and engagement. The more personal the more it resonates with members and helps them feel supported and informed.
Clearly people are expecting us to provide them with an income. And that will be about fusing guidance, tech, defaults, and guarantees into income systems. We’re going to see the focus shift to our ability to maintain sustainable, reliable income rather than chase outperformance. For the first time in its life, DC workplace is going to be measured on its ability to deliver an actual pension rather than just accrue savings.”
The way forward
The research offers a clear roadmap for pension providers:
- Design income default solutions as flexible, starting points, not as a one-size-fits-all or as a safety net for the disengaged.
- Recognise that emotional reassurance and trust are important factors in decision making.
- Consider understanding and awareness rather than just pot size.
- Support members with clear, timely and personalised communications.
Retirement planning is evolving, and so must the way we support members. Default retirement solutions have the potential to be much more than a regulatory tick box. They could be a trusted foundation that helps members navigate retirement with confidence.
The industry must commit to a shift in mindset, from product-centric to member-centric, from transactional to relational, and from reactive to proactive. Mercer’s research highlights this as the way forward because, ultimately, behind every pension pot is a person seeking security in retirement.
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