As member options have expanded, trustees have sought to provide greater support and guidance, but this has also added complexity to administration processes. These increasingly intricate flows now involve a multitude of agents and handoffs. While the intentions behind these developments are commendable, they often lead to unintended challenges for members.
Trustees, eager to ensure the best possible member outcomes, have introduced various technologies, advice services, and process layers to enhance member journeys. However, these efforts can sometimes backfire, creating bottlenecks and points of friction that disrupt the member experience and prevent them from making the best possible decisions. Excessive barriers and friction in the process often cause members to give up and opt for the easiest, quickest choice available—a choice that may not necessarily be in their best interest.
The typical retirement journey: from simplicity to complexity
In the past, a typical retirement journey for a pension scheme member was relatively straightforward. Members would receive a few basic options from the administrator, such as taking a tax-free lump sum or purchasing an annuity. Decisions were limited, and the process was largely linear and easy to navigate. Today, this simplicity has evolved into a labyrinth of choices, involving multiple options, third-party modelling tools, advice services, and guidance services. Each additional layer introduces potential points of friction.
For instance, a member nearing retirement might now be presented with:
- Modelling tools to explore different retirement scenarios.
- Guidance services offering general advice on financial planning.
- Third-party advice services to provide personalised recommendations.
- Technology platforms enabling self-service for decisions like drawdown or annuity selection.
While these tools and services are designed to empower members, the reality is often less ideal. Each handover between services or tool can inject friction into the process. Members may need to re-enter the same data multiple times, navigate differing interfaces, or interpret conflicting advice. This not only risks overwhelming members but can also lead to delays or, worse, members disengaging entirely from the process.
The danger of friction in the retirement process
When friction occurs at key stages of the retirement journey, it can lead to significant issues such as:
- Process paralysis: Members faced with too many choices or unclear next steps may delay decisions indefinitely.
- Data and communication barriers: Poor integration between systems and agents in the process can result in members feeling like they need to complete lots of unnecessary steps to get their pension paid.
- Overwhelmed members: The sheer volume of options and steps can cause anxiety, leading to disengagement.
For example, a member might start by using a modelling tool to calculate their expected retirement income, only to find that the advice service they consult suggests different figures based on a separate set of assumptions. Add to this the need to upload documents or verify information across several platforms, and it’s easy to see how friction can derail even the most well-intentioned processes.
Simplifying the retirement journey
To address these challenges, the industry must focus on creating a smoother, more cohesive retirement journey. This requires:
- Integrated systems and data sharing: Ensuring that members’ data flows seamlessly between all tools and services, reducing duplication and inconsistencies.
- Clear communication at handover points: Members should know exactly what to expect at each stage of the process, with concise instructions and clear timelines.
- Member-centric design: Tools and services should prioritise ease of use, with intuitive interfaces and streamlined processes that guide members step by step.
- Aligned objectives among stakeholders: Trustees, administrators, and service providers must collaborate to eliminate contradicting advice and ensure a unified approach to member support.
- Continuous process improvement: Regularly reviewing member feedback and identifying pain points can help refine the journey over time.
Turning complexity into clarity
The modern retirement journey doesn’t need to be a source of frustration for members. By addressing points of friction and focusing on integration, transparency, and simplicity, the industry can transform a potentially overwhelming process into one that is empowering and effective. Trustees and administrators must work together to ensure that members can navigate their retirement options confidently and without unnecessary hurdles.
Ultimately, the goal is clear: to create an administrative experience that not only meets regulatory and operational requirements but truly supports members in achieving their retirement goals.
James Milan, Client Relationship Associate – Trafalgar House
