The UK retirement market is at a "critical" inflection point ahead of the 2027 deadline for master trusts to provide a default decumulation solution, Pi Partnership has said.

Its research, which explores how 12 UK master trusts are preparing for the Pension Schemes Bill and the future of retirement income, found that eight out of 12 master trust providers are actively developing decumulation defaults, while two master trusts (TPT and Aviva) have either launched or are ready to launch solutions.

The research also revealed that six out of the 12 providers interviewed offer post-retirement glidepaths, meaning that half of the default funds remain “static” at the point of retirement.

Pi Partnership professional trustee, investment specialist and author of the report, Hans-Cristoph Hirt, argued that it is “concerning” that many default strategies today become static at the point of retirement, especially given the limited member engagement.

“From an investment perspective, decumulation should be a solvable problem. The building blocks are already in place,” he said.

“The real challenge now is designing default decumulation solutions that offer the best possible fit - not a perfect one - for turning savings into income, based on the member data available.”

In terms of emerging solutions, the research highlighted that models prioritise cohort segmentation, flexibility and clarity.

The most common approach planned seemed to be a blend of drawdown and annuity, often supported by ongoing glidepath de-risking until an annuity starts.

The report revealed that one provider (TPT) confirmed plans to launch a whole of life collective defined contribution (CDC) solution in early 2027, with others watching closely.

Hirt noted that CDC-based decumulation solutions may also provide a “valuable” future option.

Beyond product design, the report also explored current member behaviours and expectations.

The research suggested members do not focus on income, as most either fully cash out or take tax-free cash at retirement and leave the rest untouched.

It found that structured drawdown as a decumulation option is “rare” given that pot sizes are typically still modest - often under £10,000.

However, the report indicated that this is changing as providers expect average pots to grow significantly by 2050, with one provider citing an average pot of around £225,000 and a growing minority of members are already reaching £100,000 or more.

In light of this, the company said that decumulation defaults are therefore set to become far more relevant in the years ahead.

Providers reported that they are tackling behavioural inertia and confusion “head-on” through using tools such as spending alerts, income modellers, educational webinars and multi-channel support that embraces the human touch.

The report also revealed that many providers have embedded Pensions UK’s Retirement Living Standards to help members visualise “what good looks like”.

With more planned in the member engagement space, PI Partnership said that “all are watching with particular interest” on how the Financial Conduct Authority’s Targeted Support regulations will land. The latest consultation was subsequently published on 30 June 2025.

The report also assessed provider attitudes toward AI, with half of the providers scoring AI eight out of 10 in terms of optimism for its potential to personalise support, scale interventions and model better outcomes, while reinforcing the importance of human guidance for members.

The 12 master trusts that took part in the research were Aegon, Aon, Aviva, NatWest, L&G, LifeSight, Mercer, Railpen, Scottish Widows, SEI, Smart, and TPT.

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