Philip Smith, DC Director of TPT Retirement Solutions
Over the last two decades, the UK's workplace pension system has transformed the way people save for retirement. Automatic enrolment (AE) has brought millions more employees into the system and assets under management have soared, and the concept of saving for old age is now embedded in workplace culture. Yet despite this progress, a persistent question remains: are workplace pensions truly fit for purpose?
The short answer depends on who you ask. From an infrastructure perspective, the system works in so far that people are saving, schemes are functioning, and regulation is evolving. But when we look at member outcomes, levels of engagement once workers are enrolled, and the issue of long-term adequacy, it's clear there's still a long way to go.
It starts with engagement
Engagement has long been one of the most intractable problems in pensions. Despite countless initiatives, the sector finds itself repeating the same messages it did 25 years ago: people simply don't engage until pensions feel personally relevant – which is often far too late.
Convincing a 30-year-old to care about something that will pay off in 40 years' time is a tough sell. Yet, it's precisely at this stage of life that engagement matters most. Early decisions on contribution levels, consolidation and risk appetite can dramatically improve outcomes thanks to the power of compounding. Waiting until one's 50s is, in many cases, too late to make a meaningful difference.
The answer might lie outside the traditional ‘pensions playbook'. Younger audiences consume information through digital, bite-sized, interactive channels. Financial services firms have embraced influencers, social media and mobile-first design to meet consumers where they are. The pensions industry, by contrast, has often lagged behind – slow to adopt modern communication strategies and reluctant to experiment with platforms such as TikTok or YouTube. Some providers have succeeded in breaking through, but usually at a huge cost and without systemic industry change.
The impending Pensions Dashboard could be a game-changer in this regard. For the first time, savers will be able to see all their pension information in one place. This could potentially spark a huge surge in curiosity and engagement. The challenge for the industry will be to harness that momentum, ensuring that when people log in, they find intuitive tools, clear explanations, and easy routes to action. If the sector is ready, the dashboard could be transformative. If it isn't, the moment may be lost.
Using tech to visualise change
Pensions are complex, but well-crafted digital designs can make them more accessible. Providers must embrace mobile-first platforms – not as an afterthought, but as the default experience sitting at the core of how they communicate with members. Most people manage their finances on their smartphones these days, so pension platforms really need to start meeting that expectation.
But it isn't just about convenience. A seamless user experience can help savers understand the real-world consequences of their decisions – for instance, what increasing contributions by just 1% today might look like in 30 years' time. Translating dry financial data into clear, personalised projections is vital to making pensions feel tangible and relevant.
Most savers remain in default investment strategies via automatic enrolment – and rightly so. It's unrealistic (and risky) to expect individuals to make sophisticated investment decisions. Trustees and providers are better placed to construct portfolios that balance both risk and reward.
Fortunately, these defaults are improving. The Mansion House reforms have catalysed a shift away from passive, market cap-led investing towards more diversified, return-seeking strategies which include private markets and infrastructure. The government and industry are broadly aligned on this agenda – but the implementation will be key.
Members don't need to become investment experts, but they do need basic awareness. For most members, there are only two levers they can pull: how much they pay in, and when they retire. Investment performance, while important, is largely out of their hands. What members can monitor are fees and fund performance. Transparency here – whether that's through more accessible communication, or more intuitive digital interfaces – builds trust, ensuring savers feel a sense of ownership and control without being burdened by complexity.
The onus is therefore on providers to ensure that defaults are fit for purpose. That means regularly reviewing strategies, communicating clearly, and maintaining the right balance between protection and growth. The goal isn't to encourage interference, but to create confidence that professional management is delivering value.
Setting members up for retirement
The next major challenge lies in what happens when people reach the end of their working lives. Since the introduction of Pension Freedoms, retirement has become a decision point rather than a destination. Savers suddenly face complex choices about drawdown, annuities, and cash withdrawals – often with little or no guidance.
It's here that the system is arguably least fit for purpose. Many savers arrive at retirement without a clear plan for turning their savings into a sustainable income. This is why we see some people cashing in large lump sums for short-term pleasures, unaware of the long-term consequences – and likely tax bills. Others simply leave money sitting in cash, eroding in real terms. The industry must do more to help members navigate these decisions confidently.
A new generation of default retirement solutions could change this. Legislation currently moving through Parliament will require providers to offer ready-made pathways that guide savers through decumulation – with implementation expected around 2026–27. These solutions should aim for simplicity, not paternalism: easy-to-understand interfaces, clear prompts, and guidance that empowers rather than overwhelms. Some providers are already innovating in this space. Earlier this year, TPT launched its income-for-life product where the only question savers need to answer is how much monthly income they want – all the technical decisions are left to the provider.
The guidance gap
However, even the best-designed defaults won't solve everything. The guidance gap – the space between needing advice and being able to afford it – remains a major obstacle. Millions of savers will never pay for regulated financial advice, yet they still need help making critical decisions.
This is where the industry's role as educator becomes paramount. Providers and trustees can help to reshape the narrative from "a pot of money" to "a lifelong income". Communications should focus on sustainability, not spending sprees. The message must be that pensions are there to last a lifetime, not fund a single purchase or holiday.
Equally, tax-free cash, while attractive, can be a trap. With no direct link between the lump sum and future income needs, it's easy for members to overestimate their financial freedom. As one expert put it, savers must resist being "wooed by the jam today" – because their pension will need to sustain them for decades.
So, are they fit for purpose?
Workplace pensions have come a long way. Auto enrolment has brought about mass inclusion, Mansion House reforms promise better returns (in theory), and the forthcoming dashboards and default decumulation pathways will make pensions more transparent than ever before
Ultimately, the question of whether workplace pensions are fit for purpose depends on how well they prepare members for every stage of the journey – right from the first payslip to the very last withdrawal. That means setting people up right from the earliest possible age, supporting them through accumulation, and guiding them smoothly into decumulation.
For individuals, that begins with simple actions: tracking savings, reviewing performance, and considering gradual increases in contributions. The tax advantages of additional contributions remain one of the most powerful incentives in the financial system – yet many savers underestimate their impact.
For providers and policymakers, the task is more complex: ensuring that systems, guidance, and products evolve in step with social and technological change. The coming years will test whether the industry can meet that challenge.
It's fair to say the sector's work is far from done. Engagement remains stubbornly low, technology adoption uneven, and the guidance gap wide. The risk is that millions of savers reach retirement unprepared to make decisions that will define their later lives.
If the industry can crack these challenges – making pensions relevant, accessible, and reliable from start to finish – then workplace pensions will indeed be fit for purpose. Until then, the system remains a work in progress: functional, yes, but not yet fulfilling its full potential.
