Adequacy is the challenge of our time – it’s time to build on participation to deliver good retirement outcomes

An illustration depicting three individuals interacting over a stack of coins, symbolizing support and collaboration in financial planning.

Recently published research has revealed the scale of the challenge facing defined contribution (DC) savers, particularly renters and those without other savings. The findings should be a wake-up call for trustees, highlighting that generic solutions are unlikely to be enough. Patrick Coyne, Interim Director of Pensions Reform at The Pensions Regulator (TPR), asks trustees to consider their decumulation strategies now to deliver better retirement outcomes.

I’m lucky enough to have a home office. From it, I can see workers renovating a grand old hotel. They are braver than I am, carrying scaffolding up in the wind, and skilled too, sculpting ornate roses in the facade to restore a Victorian landmark back to its former glory.

But they won’t be able to do this forever. As they head towards later life, they will need a different source of income to enjoy life.

As a society, we should be extremely proud of our success in getting people saving into pensions, with eight in 10 employees now putting something away.

Now the job is to make sure it is really worth it and that people generate funds that will last them throughout their retirement.

Pensions adequacy, as the government’s new commission shows, is the challenge of our time.

And for all of us, the spotlight must shift from participation to retirement outcomes – making sure pension saving translates into a decent standard of living in later life.

New data, old problems

Recently published research from the Department for Work and Pensions (DWP) shows many defined contribution (DC) savers, especially renters and those without other savings, are struggling to prepare for retirement. These cases are not rarities, they are an emerging norm.

The data, which comes from a survey of more than 4,000 people aged between 40 and 75, shows:

Only 22% of people who had not yet accessed their DC pension said they had a clear plan for how they would access it.

21% did not know they had to make a choice.

56% knew there was a choice but did not have a clear plan.

Those without a plan said more information from government (60%) or pension provider (61%) would help them decide.

Combined with Pension Policy Institute research, sponsored by TPR, which highlighted in May that:

Of those fully withdrawing their DC pension savings, over 70% did so without professional advice or tailored guidance.

Of the more than 450,000 pots accessed for the first time between October 2023 and March 2024, 51% were fully withdrawn as cash…

…it is becoming clear that millions of people saving into DC pensions need and want more help and support at retirement.

Why this matters now

The DWP’s Planning and Preparing for Later Life data shows that in 2024, people were generally less confident about achieving the standard of living they want in retirement.

Adding to this, government analysis suggests that four-in-10 (43%) working-age people, equivalent to 14.6 million people, are undersaving for retirement, when measured against their target replacement rate, a benchmark for maintaining living standards in later life.

If we don’t act, we risk a generation of savers reaching retirement with too little and too few options.

That is why trustees must rethink their role, not just as stewards of assets, but as enablers of good retirement outcomes. Generic solutions that resort to basic signposting to products such as drawdown will not cut it. Trustees must consider how different defaults will suit different types of savers. And bring forward plans for simple but tailored support, smarter decumulation strategies, and clearer guidance.

The support gap

Despite the availability of trusted services such as Pension Wise and Money Helper, awareness remains low. This is in part, a reflection of the inertia based, some would say paternalistic system, created by automatic enrolment. Participation was built on savers not having to engage. That has had many benefits, but as savers move to retirement, there is a need for default solutions in retirement that normally include a later life income unless members choose otherwise. There is also a need to rethink how we build awareness and support.

According to DWP research, of people aged 40 to 75:

Only 30% have heard of Pension Wise.

Just 9% know about Money Helper.

Trustees could do more to signpost these services early and often, not just at the point of retirement.

What’s coming

The Pension Schemes Bill will introduce guided retirement duties, requiring schemes to provide structured support as members approach retirement. At the same time, pensions dashboards will transform how savers engage with their pensions, offering clarity to many for the first time about where they are against their retirement goals. It’s a vital step toward a more engaged saver base, but it will also highlight the adequacy gap that many are facing.

Greater awareness is the first step towards good retirement decision-making. But awareness alone won’t be enough, we need new solutions which help support savers into the right retirement products for them.

I want trustees to see this as an opportunity to lead. By aligning messaging, reviewing decumulation options, and training customer support teams, they can be ready to meet the moment and help savers with the most difficult problem in finance.

Innovation and your insight needed

At TPR, we are committed to supporting innovation. Our innovation service offers early regulatory guidance to help schemes develop flexible, user-friendly retirement products that reflect the diverse needs of savers.

We also urge schemes and providers to share insights and engage with the FCA’s consultation on targeted support as well as the Pensions Commission. This is your chance to shape how guidance is delivered in practice.