The pensions industry should maintain engagement and not rely too heavily on default solutions at retirement, industry experts have stated.

Speaking during an ABI Annual Conference session on personal pensions, Fidelity International head of platform policy and oversight, James Carter, emphasised a “fundamental difference” between individuals who actively opened a personal pension and those who were automatically enrolled into a workplace scheme.

He cautioned against assuming that all savers were inherently passive and warned that the industry had increasingly accepted disengagement from workplace pensions, and was now applying the same mindset to retirement.

“Quite often in workplace pensions, we give up on trying to engage people. We say people are passive, they don’t respond, they’re sleeping through this process, and we’re now applying this thinking to retirement,” he said.

Carter said that a growing focus on retirement defaults risked masking a failure to engage savers at a critical decision point.

“We’re going to have retirement defaults because we’ve given up on engaging people at the point of retirement, the most fundamental financial decision they might make in their lifetime,” he stressed.

Carter added that the personal pensions market showed why engagement should not be abandoned.

“We have to not give up on engagement, particularly in the personal pensions market, where we have fundamentally engaged customers, as they’ve taken that first step,” Carter said, calling on the workplace pensions industry to be “bold” in maintaining an aspiration to engage.

The importance of engaging people at the right moment was echoed by NextWealth managing director and founder, Heather Hopkins, who explained that relevance and timing were central to effective engagement.

“You can lead a horse to water, but if the horse isn’t thirsty, it won’t drink,” Hopkins said, arguing that providers needed to identify key life moments that prompted people to engage with their pensions.

She highlighted the role technology could play in achieving this.

“Using AI to develop sophisticated personas to hyperpersonalise communication to people, because not everyone’s going to be worried at the same moment, but if you get them at the right time, your chances of success will be much greater,” she claimed.

Echoing the need for better engagement, Vanguard head of strategy and offer, James Larsen, noted that fear and friction remained major obstacles for savers.

"Investment can be daunting for your average person out on the street,” he said.

“We need to take the complexity of it and make it simple for people.”

Larsen argued that targeted support could play a significant role in improving engagement, describing it as a way to reach people at the right time without pushing them directly into regulated advice.

He added that Vanguard were “really big supporters of targeted support and the potential that brings to the market”.

Carter also described targeted support as a crucial middle ground between guidance and advice.

“Targeted support is a real gift, in terms of being able to step into that middle ground between advice and guidance, and be very specific with a customer about a course of action,” he said.

“It can be really important in triaging people into advice, helping some customers understand that they have a complexity of situation that doesn’t allow them to fit within a targeted support segment,” Carter stressed, while noting that targeted support could also serve those who did not fit traditional advice models.

Larsen agreed, arguing that the current framework left many savers underserved.

“At the moment we’ve got guidance and advice, and there’s a gulf between them,” he warned, describing targeted support as “a first step towards building a more engaged consumer base”.

Meanwhile, trust was also highlighted as a critical issue.

Altus Consulting insights director, Robert Holford, suggested that the industry had become overly cautious about engagement for fear of unintended consequences.

“The industry’s got really nervous about the concept of engagement damaging the savings vehicle which we’ve built, because we’re worried about what people might do with their money,” Holford warned.

However, he argued that stronger engagement could support both better outcomes and greater confidence.

“The better we get at engaging, we can marry a strong savings vehicle with a strong trust engine, to give this entire system a 20, 30, 40-year lifespan,” he said.

“At the moment, the lack of trust in accumulation is a massive problem, because we’re building it all at the end of a journey,” Holford added.

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