Lauren Wilkinson: The potential value of targeted support lies in its realism
The latest of the Pensions Policy Institute’s (PPI) regular columns says targeted support should deliver better, more actionable support within the constraints of how people actually behave.
The Financial Conduct Authority's (FCA) new targeted support regime represents a major reform to the UK pensions landscape, which could significantly improve retirement outcomes.
However, its success will hinge on whether it can address one of the system's most persistent and deeply embedded problems – low engagement.
Insights from our previous research on engagement underline just how complex that challenge is, and why targeted support may represent a step-change in tackling it.
A means, not an end
A key finding from our engagement research series was that engagement is not universally achievable for all savers, and some may need different types of support to achieve positive retirement outcomes.
Engagement varies widely across different population groups, shaped by income, age, confidence, and financial capability.
Therefore, it should not be assumed that everyone will, or should, become highly engaged, particularly in a system with auto-enrolment (AE) now at its centre and millions saving passively with little understanding of contribution adequacy, investment strategy or retirement income options. In order to deliver positive retirement outcomes across the population, there need to be safety nets in place for those who are likely to remain disengaged.
This is where targeted support has the potential to make a real difference to retirement outcomes. Rather than trying to turn every saver into an expert, it presents an opportunity for the pensions industry to deliver better decisions on behalf of those who may be less engaged or financially capable.
The reality of low engagement
Evidence consistently shows that disengagement from pensions is not simply a matter of apathy, but the result of a complex mix of behavioural, emotional, and structural factors.
Long time horizons and competing financial pressures mean pensions are often not prioritised. For some, there is a sense of complacency driven by AE – contributions happen in the background, reducing the perceived need to engage. For others, the complexity of pensions creates a barrier, leading to avoidance rather than action.
Our research found that engagement is not a single, consistent behaviour, but a spectrum. While a minority of individuals actively monitor and manage their savings, a much larger group engages only intermittently, often triggered by key life events such as changing jobs or nearing retirement. A significant proportion remain persistently disengaged, neither seeking information, nor acting on it.
Crucially, even when engagement does occur, it does not necessarily lead to better decisions. Many individuals lack the confidence or understanding to translate information into action, creating a disconnect between awareness and outcomes. In this sense, the challenge is not just getting people to engage but ensuring that engagement is meaningful and leads to improved financial decisions.
How targeted support fits the evidence
The FCA's targeted support regime is designed with precisely these behavioural realities in mind. By allowing providers to offer tailored, actionable suggestions to groups of savers, it is intended to move beyond generic communications and towards something more relevant and timely.
This approach reflects several key insights from our engagement research:
- Segmentation matters: different groups require different interventions. Targeted support explicitly segments consumers to deliver more appropriate guidance.
- Not all engagement is equal: Rather than aiming for deep, persistent engagement, targeted support focuses on improving specific decisions.
- Support for the disengaged: Perhaps most importantly, it recognises that many consumers will not seek advice, and instead brings support to them in a more accessible format.
Like AE before it, targeted support operationalises the idea that better outcomes can be achieved without requiring high levels of individual effort or expertise, instead defaulting or guiding individuals to better outcomes. The FCA's behavioural testing suggests that clearer, more tailored communications can improve understanding, confidence and willingness to act. This is critical in a system where generic communications often fail to resonate with individuals' specific circumstances.
A more realistic model of engagement
Ultimately, the potential value of targeted support lies in its realism, reinforcing our finding that the UK pension system cannot rely on high engagement or widespread financial literacy to function effectively, as this is not a feasible expectation across the population.
Instead, targeted support should offer a middle path – delivering better, more actionable support within the constraints of how people actually behave. If implemented well, it could mark a shift from a system that expects individuals to navigate complexity alone, to one that actively supports them at key moments during the pension saving and retirement journey.
In a pensions landscape increasingly dominated by DC, that shift may prove essential to improving outcomes, offering a scalable and timely intervention in an area where inertia is now the norm.
Lauren Wilkinson is a senior policy researcher at the Pensions Policy Institute
