Guided Retirement: Making the complex simple for members

At the mallowstreet DC Congress held on 11 May 2026, I was struck by how pressing the topic of Guided Retirement has become. The room was full of senior pensions and investment professionals, trustees, and advisors, all focused on navigating new regulations and practical realities as we strive to build better retirement outcomes for defined contribution (DC) scheme members.

Harriet Hayward and I delivered a cake-based session which set out to demystify 'Guided Retirement' and explore how we, as an industry, can create clearer, more suitable default retirement solutions for members.

Why cake matters at a pensions conference

We opened the session with an analogy and practical experiment: slicing a cake. It may have seemed a light-hearted start, but it was chosen deliberately. Our volunteers were asked to cut a cake for a queue of people without knowing how many people they were serving. They needed to give out a slice to those with birthdays in the first half of the year. If they started off slicing too generously, they risked running out; too cautiously, they risked leaving people dissatisfied. This simple exercise mirrors the key complexity facing DC pension savers: how do you spread your retirement savings over an unknown future period of time?

What started as a simple and hopefully fun task helped us capture something important... When there are too many unknowns, it quickly became tricky for the cake slicers to decide how big to slice the cakes and how much to give everyone.

Three key challenges for pension scheme members

Guided Retirement is about recognising the difficult reality for most DC members. The transition into retirement is fraught with unknowns: how long will they live, how will investment markets behave, and how can psychological biases be overcome? Too often, members either overspend and risk running out, or underspend and miss out on a fulfilling retirement.

We highlighted the experience in Australia, which reveals a number of people are underspending and take a prescribed 'minimum' amount, through fear of making a wrong decision and running out of money.

We cannot – and should not – expect every member to become a financial expert. Instead, our responsibility is to design solutions that are simple, prescriptive, and resilient; solutions should cater both for those who want to engage and for those who simply want a reliable income in retirement.

Emerging solutions: Flex and Fix, and Retirement CDC

The DC market is coalescing around two leading concepts: 'Flex and Fix' (or 'Flex First, Fix Later') and Retirement Collective Defined Contribution (R-CDC).

Flex and Fix typically puts members into drawdown initially, with the option to annuitise later. There is significant variation here. Some schemes introduce an annuity at a set age, others leave the choice (and responsibility) with the member. There are also differences in how schemes alert a member if their Flex and Fix income amount is unsustainable. It seems important to ensure the solution is robust even if the member stops engaging after the first step.

R-CDC, by contrast, offers a pooled solution and requires fewer member decisions. Members' funds are combined, and provide a steady income for life – turn your big cake into little slices of cake that are given to you each year. More like the cupcakes. It's a do it for me solution. Importantly, R-CDC manages longevity risk for the member and is expected, over time, to deliver higher average income thanks to collective investment (as set out in WTW's detailed analysis from March 2026 - A new era for UK DC retirement solutions).

R-CDC is designed to be far more suited to the people who aren't wanting to become pensions experts... they don't want to be the cake slicers through their retirement.

Key questions for trustees and scheme designers

As an industry, we must ask ourselves some questions. If a member does nothing beyond filling in the retirement form, what is their outcome at age 70, 80, or 90? Who bears the longevity risk – is it addressed within the solution or left to the member to manage? And crucially, does the default solution rely on sustained engagement, or is it robust in the face of inertia?

We also need to be honest about trade-offs. There have to be so-called winners and losers somewhere in a collective system like R-CDC. These trade-offs are part of the trustee decision making. R-CDC has higher expected lifetime income and protects everyone from the risk of running out of money. A design trade-off is those who die early won't have their full pot passed on to their estate (although guarantee periods and spouse's pensions can easily be incorporated into R-CDC). This shows you can't have your cake and eat it – trustees will need to decide whether they want their default solution to protect against members running out of money more than using the pension as an inheritance vehicle.

The role of communication and engagement

Defaults must be well signposted, making it clear who the default typically suits and ensuring that those with specific needs or different risk tolerances are supported to make alternative choices.

The future of Guided Retirement will depend on the industry's ability to design solutions that are simple enough for the majority, and as robust against the real-life human risks of inertia/indecision as they are against the actuarial and investment models behind the theoretical designs.

Looking ahead

The session reaffirmed my belief that, as the regulatory landscape evolves, our challenge is to give members confidence in retirement. Much like our cake exercise, it's about ensuring everyone gets a fair slice, without the stress of having to do the slicing themselves.