Festina urges UK to embed retirement income from outset
Festina Finance has urged pension providers and policy-makers to design systems around the retirement income decision from the start, arguing that schemes built mainly for saving often leave members facing complex choices when they need to draw an income.
The Danish pension administration software provider said international experience shows better outcomes when schemes embed retirement income options throughout the member journey, rather than treating income selection as a separate step at retirement. It pointed to TIAA Institute research on retirement income systems as a source of lessons trustees and policy-makers could adapt for the UK.
In the UK, auto-enrolment has expanded workplace pension participation over the past decade. Many workers now reach retirement with defined contribution savings but no clear plan for turning those savings into an income. Providers offer a mix of options, including drawdown, annuities and cash withdrawals, and members often need advice or guidance to navigate the choices.
Income from outset
Festina Finance said system design influences engagement and outcomes. It argued that defaults and governance are more effective when schemes present income options as a normal part of being in a pension, rather than as a one-off decision at the end of working life.
Dan McLaughlin, UK Country Head at Festina Finance, said international comparisons point to a consistent theme.
"The common thread internationally is that the retirement income decision is not treated as an afterthought. When it is embedded from the outset, supported by clear defaults and robust governance, schemes make it significantly easier for members to secure more sustainable income for life. Countries such as Switzerland and Chile demonstrate that integrating income options directly into the member journey, through occupational plans or standardised national marketplaces, can increase engagement without mandating any particular choice.
"International evidence also highlights the benefits of adjustable or variable income arrangements, where payments can move within transparent rules linked to funding or longevity. These designs preserve the principle of lifetime income while improving long-term sustainability, which is particularly relevant to UK discussions around collective defined contribution (CDC) schemes. The retirement income decision does not need to lock members into fixed payouts. Well-governed, adjustable income models can balance security with flexibility, giving members both confidence and control."
In practice, adjustable income models sit between fixed annuity-style payments and fully flexible drawdown. Payments can change over time within predefined rules. This design raises governance questions, including how schemes communicate changes to members and manage expectations about income stability.
CDC schemes remain a developing part of the UK landscape. They pool investment and longevity risk across members and can pay an income that varies depending on funding. That differs from individual DC drawdown, where outcomes depend on each member's pot, investment choices and withdrawal rate.
Technology constraints
Festina Finance linked the policy debate to pension administration infrastructure, saying many platforms were developed with accumulation in mind and handle decumulation or hybrid products less well.
McLaughlin said modern systems should support on-demand income options, alongside scheme designs that combine different product features.
"Supporting the retirement income decision requires modern, adaptable administration systems. Many legacy platforms were designed and built for accumulation, not decumulation, and are not optimised for hybrid designs, on-demand income options or D2C self-service services. When the income decision is integrated into the core pension journey, members engage with it more confidently and effectively. Research suggests that integration, not coercion, drives better take-up and better outcomes.
"Ultimately, this is not about replicating international systems. It's about understanding how the retirement income decision is evolving, learning from what has worked elsewhere, and making sure the underlying infrastructure supports members to make confident, effective decisions."
The comments come as pension providers invest in digital servicing and retirement tools, while regulators continue to focus on value for money, communications and outcomes. The UK also faces pressure to improve retirement adequacy as life expectancy rises and many savers reach retirement with smaller pots.
Festina Finance develops software for pension administrators, pension funds, insurers and banks. Its flagship platform, FF Life and Pension, supports defined benefit, defined contribution, collective defined contribution and life insurance products through a modular structure. The company said it supports Europe's largest pension provider, which manages more than £500 billion in assets, and expects to increase the scale of assets and savers supported as it grows its presence in the UK.