Pension schemes and providers are likely to have to design guided retirement solutions using only 'partial information' about savers, according to new research from the Pensions Policy Institute (PPI).

The report, Designing Guided Retirement Solutions: Meeting Member Needs, found that schemes will need to group members into broad, data-informed categories based on characteristics they can reasonably observe or infer, rather than relying on a complete picture of an individual's financial circumstances.

Sponsored by Now:Pensions, The Pensions Regulator (TPR), Royal London, Scottish Widows and Wealth at Work, the report examined how guided retirement solutions introduced under the Pension Schemes Act 2026 could operate in practice.

It warned that member segmentation will need to sit at the centre of guided retirement design, balancing the use of available information to create meaningful retirement pathways with the need to ensure solutions remain simple enough for members to engage with.

However, the report suggested that commonly available information, such as pension pot size, is unlikely to be sufficient on its own to reflect members' wider financial circumstances, particularly where individuals hold multiple pension pots or have other sources of retirement income.

Therefore, the PPI argued that guided retirement should be viewed as the gradual development of a new layer of retirement support within the UK pensions system, rather than a standalone retirement product.

Meanwhile, the report identified a number of competing objectives that guided retirement solutions will need to address, including income security, flexibility, simplicity and the ability to adapt to changing circumstances.

According to the analysis, these objectives cannot all be maximised simultaneously, meaning schemes and providers will need to make trade-offs when designing retirement income pathways.

While the Pension Schemes Act 2026 places an emphasis on providing a regular retirement income, the report noted that the legislation does not specify the extent to which solutions should seek to mitigate risks such as longevity, inflation or investment volatility, or how strongly schemes should guide member decisions.

The PPI also suggested that guided retirement should be viewed as an ongoing process rather than a one-off decision at retirement.

It argued that retirement pathways may need to evolve over time as members' circumstances change, raising important questions about when support should begin, how pathways should adapt, and how members should be supported amid changing market conditions and life events.

In addition, the report highlighted the importance of member communications, warning that the effectiveness of guided retirement will depend not only on solution design but also on how it interacts with wider support services, including Pension Wise, targeted support and regulated financial advice.

Commenting on the findings, PPI senior policy researcher and lead author, Mariana García Requejo, said: "Guided retirement has the potential to play a critical role in improving how individuals navigate retirement income decisions, but many questions lie ahead over its design and implementation.

"Competing objectives such as income security, flexibility, and simplicity present clear challenges for default solutions to meet a diverse range of member needs.

"In order to meet them as best as possible, it's vital these solutions are understood as a gradual development towards a new layer of retirement support within the UK pensions system, rather than a single product innovation."

Now:Pensions director of public affairs and policy, Lizzy Holliday, added that the report highlighted how the risks faced by defined contribution (DC) savers at retirement interact with key policy concepts such as default solutions, regular income requirements, engagement and communications.

"We hope this report provides useful insights for government, regulators and industry who are working hard to turn concepts into good outcomes for all savers," she stated.

Meanwhile, TPR director of policy, pensions reform, Joey Patel, urged schemes to begin preparing for the introduction of guided retirement solutions.

"Members need more help to turn a savings pot into a sustainable retirement income, and default pension benefit solutions have the potential to make a real difference," Patel continued.

"We urge schemes to start preparing now by getting to know their members, improving their data and considering how they will design and implement defaults that truly deliver better outcomes for members."

Echoing this, Royal London director of policy, Jamie Jenkins, described guided retirement as a crucial concept given the limited availability of regulated financial advice, while Scottish Widows retirement director, Carolyn Jones, said well-designed solutions could help individuals navigate increasingly complex retirement decisions.

However, Wealth at Work director, Jonathan Watts-Lay, cautioned that a generic default pathway could risk members "sleepwalking" into retirement decisions that do not reflect their individual circumstances, particularly where they have multiple pension pots.

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