Guided retirement: Unlocking better engagement and future outcomes
Guided retirement’s aim of encouraging people to think of their pension savings as reliable long-term income refocuses pensions on what, arguably, they were originally designed for.
But if we’re to ensure that as many employees as possible secure a stable and comfortable income for retirement, the conversation around how savings turn into income needs to happen much earlier than it currently does. All too often, this critical question is only addressed when employees are on the cusp of retirement.
That's far too late.
The looming deadline forces them to make complex decisions with far-reaching consequences under time pressure. Throw in a lack of familiarity with technical language, and most members understandably opt for the path of least resistance, without fully grasping its implications.
On the surface, this seems like an engagement problem. But I'd argue it's a design issue. We can't bring up these decisions at the point of maximum complexity and minimum familiarity, then act surprised when people have trouble engaging.
To improve later-life outcomes, we need to put consistent, continuous effort into helping employees engage throughout their careers. And that starts by getting people to think about life after work, and what they’re likely to need, much earlier on.
Achieving maximum impact with a limited toolbox
Not only are customers presented with retirement income decisions too late in the day, but they’re given a limited set of options from the industry's toolbox.
There’s a narrow menu on offer, typically consisting of annuities, flexi-access drawdown, UFPLS (Uncrystallised Funds Pension Lump Sums), and lump-sum withdrawal. Whenever seemingly different products appear, a closer look usually reveals they're hybrids or variations on a familiar theme.
With such a limited toolbox, the real art becomes how we connect what we have at our disposal into a well-guided journey: the defaults we set for different groups, when we present these choices, and the support we offer customers along the way.
Getting this right is what boosts engagement and makes customers feel more confident that they have a clear path from saving into their pension pot to spending it when they retire.
The destination is important – but so is mindset
Viewing your pension pot as a finite sum you must stretch out over the duration of your retirement feels scary for a lot of people. Without support how can they manage how much they’re regularly drawing while ensuring they don’t run out of money?
If a pension saver understands that the goal is to use their pot to generate income, however, the discussion stops being 'Will I have enough?' and becomes 'How much can my pot get me, and for how long?'
Framing pension savings as a means to an end, not the end in itself, transforms how they experience it. The decumulation discussion now clearly matches what they want: a stable and comfortable retirement.
As a result, they'll be more likely to engage, which is what will lead to better outcomes: more knowledge, more confidence, and greater retirement readiness.
Speaking the same language
Another persistent issue which, in my view, hampers productive conversations around decumulation is the language of pensions.
Technical terms are inaccessible to the average customer, and this creates unnecessary, completely avoidable friction that erodes confidence and leads to disengagement.
Think of it this way. You wouldn't keep reading a book if you had to look up every other word in the dictionary. So why should we expect individuals to undergo a crash course in pensions terminology simply so they can decide the best way to use their own money?
User testing consistently shows that, when the language is simpler, understanding improves and customers are more willing to act. The takeaway is clear: how we communicate makes a huge difference. It's time we made more (and better) use of plain language.
That said, we must also acknowledge that clear language, on its own, isn't a silver bullet. Between full financial advice and general – albeit well-explained – information, there's a new valuable middle ground: targeted support, at critical moments along each saver's journey.
This, in my view, can contribute massively to shifting outcomes without adding complexity or forcing providers to rethink their product toolbox.
Engagement happens when we get the basics right
For most employees, their pension is just one element in the wider whole that makes up their financial wellbeing.
Viewed this way, poor engagement isn’t just an industry problem – it actively disempowers people trying to manage their finances. This is the predictable outcome of designing systems around products and regulation, then dropping humans into them at the last minute – they don’t connect with people.
That's why we need to get the design basics right – to help people to understand their options and feel able to act in a way that furthers their goals.
Engagement only follows when we adequately support people throughout key career and life stages, communicate in plain language, and start talking about the long term from day 1, not at ages 55 and up.
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Supplied by REBA Associate Member, Cushon
Cushon is a workplace pensions and savings provider with an award-winning proposition.
