A new report examining how people approach the complex transition from saving to spending in retirement and the emotional and behavioural dynamics affecting their decision-making process has been published by the Standard Life Centre for the Future of Retirement.
The research, Decisions in the dark: How the Defined Contribution pioneer generation are navigating retirement income decisions, found that people’s experiences of decumulation are highly varied and deeply emotional. While many value flexibility and control, others feel overwhelmed by complexity and jargon, against a backdrop of a desire for reassurance at key decision points in their retirement journey. This creates a fundamental challenge for providers, trustees and the regulator as they seek to implement Targeted Support alongside Guided Retirement pathways to deliver simplicity and certainty without stripping away individual autonomy.
The research suggests that well-timed, more personalised support could make the biggest difference to individuals decision making at retirement, but that there isn’t a one-size-fits-all solution. Advice, Targeted Support and Guided Retirement will need to accommodate diverse needs, fluctuating confidence levels, and the desire for reassurance at key decision points. 2026 will be a key year to get these levers right and offered to more consumers at pace.
The report examines the emotional and behavioural dynamics at play during this critical life stage and explores the psychological biases that influence their choices. Conducted by BPI Group on behalf of the Standard Life Centre for the Future of Retirement it draws on in-depth interviews with 25 people aged 55–70, who all have at least one defined contribution (DC) pension pot and have either made a decumulation decision in the last three years or are seriously considering one in the next 12 months.
Interviews explored attitudes to risk, financial confidence, family circumstances and working patterns, providing rich qualitative insights into the decision-making process. Following the initial interviews, there were several re-contact conversations with individuals, along with joint conversations with partners as a household to understand the varied issues influencing decision making.
Key insights from the interviews include:
- The move from a regular wage to pension income is often fraught with anxiety, uncertainty and fear of “getting it wrong” with “running out of money in retirement” being a reoccurring theme, particularly for those with lower financial confidence.
- External factors, like the rising cost of living and political uncertainty, means that decisions are often driven by a deep-seated need for security, even if this isn’t the best financial decision in the long-term. This is clearly seen in the near-universal desire to “clear the decks” by paying off debts before retirement to gain a sense of control.
- People value flexibility and control over their money yet find the process complex and daunting.
- Emotional factors – from fear of boredom to loss aversion and feeling overwhelmed with decision making (a finding that also came out strongly in qualitative research on consumer attitudes to Targeted Support, see background below) – strongly shape behaviour, often leading to procrastination or piecemeal decisions.
- The 25% tax free lump sum is universally popular, seen as a well-deserved bonus after a lifetime of saving. It is rarely taken without a specific purpose and often taken while the individual is still working, most commonly being used to pay off the mortgage and leads to a sense of being “ready” for retirement.
- Those aged 55-70 are pioneers of a new type of retirement – seeing the widespread shift from Defined Benefit (DB) to Defined Contribution (DC) – with their retirement not defined by a single event, but by a prolonged period of complex decision making.
Director of the Standard Life Centre for the Future of Retirement, Catherine Foot, said: "How you decide to decumulate your pension pot is one of the most important decisions you will make about your money, but it’s incredibly challenging, and many people feel understandably anxious and ill-equipped.
“Our research shows that people want simplicity and certainty, but they also want control. The challenge – and opportunity – is for the financial services industry to provide more personalised, timely support that helps individuals navigate complexity without feeling locked in. As the Pensions Commission continues its work, and as the FCA works on new activities like Targeted Support and Simplified Advice, they will need to consider what interventions both in terms of free guidance, decision support and financial products could better serve people’s needs.
“There isn’t a single path through this journey, nor a single decision that people can make that will set them on the ‘right’ course for their whole retirement. Instead, managing your money into and through retirement is more like a series of stepping stones. The ask from this pioneering generation of DC retirees is clear: they want and need practical, simple support that meets them where they are, financially, practically, and emotionally. They want support that acknowledges the messy reality of these fundamentally difficult decisions but that helps them cut through the fog and have more confidence in the decisions they are taking at each step on their journey.”
Additional background
In July last year, the Centre for the Future of Retirement published a unique qualitative study into the consumer attitudes and expectations of the FCA’s proposed Targeted Support service. It found that pension savers reported feeling of anxiety and a sense of being overwhelmed when it came to the complexities of how best to access their retirement savings It also found that consumers welcomed Targeted Support’s potential to provide more relevant help with retirement income decision making, providing them with greater direction and the filtering out of information that wasn’t relevant to them.
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