Mariana Garcia Requejo: Greater alignment across policy, regulation, and market delivery will be integral to creating a decumulation market that is coherent, navigable, and capable of delivering good outcomes for all savers.
Over the past decade, the UK pensions landscape has been reshaped by shifting employment patterns, evolving market structures, and major policy developments.
The rise of defined contribution (DC) pensions, the introduction of auto-enrolment (AE), and the flexibility introduced through Pension Freedoms have all contributed to a changing retirement landscape.
As DC savings continue to become an increasingly important part of savers' retirement income, new demands are being placed on savers and providers alike, raising important questions about whether the current retirement-income market is consistently delivering. With the stakes now higher than ever, this moment offers a powerful opportunity for industry-wide collaboration to build the more robust support structures needed to greatly improve outcomes for savers at retirement and beyond.
The new Pensions Policy Institute report – Assessing the UK Retirement Income Market: Defaults, Active Choices, Innovation, and the Existing Gaps and Challenges for Delivering Value for Money (VfM) – examines how the retirement-income market currently operates, how it is evolving to meet savers' needs, and what "value" might look like in the decumulation stage of retirement.
Grounded in expert insights and a wide-ranging evidence base, this report maps how the retirement income market is functioning today: how savers are navigating it, where support falls short, and what this means for defining VfM in practice.
A more complex landscape
While AE has facilitated passive participation and built momentum for saving, savers face a more complex landscape at retirement.
They are required to make high-stakes decisions, often without structured support or guidance. Recent data shows a clear trend: when savers first access their pensions, more than half of pots are withdrawn in full (a pattern especially common among smaller pots). This raises concerns that, in the absence of scheme-facilitated retirement-income default solutions, savers may be making choices that do not fully align with their retirement needs, potentially compromising the adequacy and sustainability of their future income.
While regulated advice and guidance services exist, they remain underused. Stakeholders consistently highlighted the need for well-designed, simple, and accessible decumulation defaults that can support those less likely to engage. Blended pathways, which are based on a "flex then fix" approach that balances flexibility and security as savers' needs evolve, are a proposed solution.
Although such models are being conceptualized by providers, they are not yet widely available. Implementing such models will require careful design to account for the diversity of saver circumstances, and to provide appropriate off-ramps for those who wish to make more active decisions. Despite these defaults not being "fit for all", they provide an effective fallback that helps avoid negative outcomes for disengaged savers.
Proposals such as Financial Conduct Authority's (FCA's) targeted support and Department for Work and Pensions' guided retirement pathways could help bridge the current gap in support, allowing schemes to offer more structured suggestions without crossing regulatory lines. However, stakeholders note that ongoing uncertainty at the advice-guidance boundary still discourages providers from giving personalised help. They are especially unclear on how the FCA's Advice-Guidance Boundary Review will translate to trust-based schemes, possibly leaving savers in different scheme types with uneven access to support.
Throughout the report, the PPI also highlights the lack of comprehensive data on how savers use multiple pots or how they manage their income throughout retirement. Most data is reported at the pot level rather than the individual level, obscuring the broader picture. These gaps make it difficult to assess potential for VfM or to design targeted policies that improve savers' outcomes.
Viewed positively, ongoing reforms offer an opportunity to build a stronger evidence base. The upcoming Pensions Dashboards, the proposed consolidation of small pots, and regulatory work on retirement income solutions could help address data gaps. Stakeholders agree that more integrated data will be essential to understanding saver behaviour and improving outcomes in retirement. In parallel, innovation in the market is increasing. Some schemes and providers are trialling new products and pathways, developing retirement planning tools, or taking steps to better segment and support their membership.
As DC pot sizes grow, and more savers enter retirement through AE, there is an opportunity to build on this momentum and ensure good outcomes are delivered at scale. Greater alignment across policy, regulation, and market delivery will be integral to creating a decumulation market that is coherent, navigable, and capable of delivering good outcomes for all savers.
Mariana Garcia Requejo is a senior policy researcher at the PPI
