Flexible retirement options are a great start – but employees need guidance too 

Flexible retirement options are now a standard feature in most defined contribution (DC) schemes. Mercer's research (2025 DC MOT report) shows that 70% of UK employers offer access to flexible retirement options, such as annuities, drawdown and lump sums.

However, just because flexibility is available doesn’t mean members are getting the best outcomes. Too often, they navigate these complex decisions alone, with potential consequences not just for their own finances but for their employer’s, too. 

The introduction of pension freedoms in 2015 gave DC members aged 55 and over much more control over how they access their retirement savings. Rather than being required to buy an annuity, members can now take a lump sum, draw down their savings gradually, or use some combination of access options. Each option has different risks and benefits and choosing the right one is a complex, high-stakes decision.

Importantly, schemes are not obligated to offer all these options. According to Mercer’s research, 10% of employers’ schemes signpost members to a specialist non-advice vehicle to explore their choices, while 20% require employees to transfer out to access the option that works for them. The members of these schemes face clear barriers to flexibility, but even among the 70% of employers that offer flexible options, significant challenges remain. 

Mercer’s analysis shows that, when members make the wrong decisions, they can impact the level of benefits they receive by as much as 60% . Without support, members may pay too much tax, draw down their savings at an unsustainable rate, choose exploitative high-fee products, fall for pension scams or even delay retirement due to uncertainty, fear or inadequate savings. 

Each of these outcomes can be personally costly for employees and may have serious implications for their employers, too. Poor decision-making can lead to challenges in workforce and succession planning and harm workplace morale, ultimately undermining the effectiveness of the benefits packages employers work hard to provide. 

Employers invest heavily in helping staff build up pension savings. To maximise the value of that investment, it’s worth considering whether members are getting the right kind of help as they make important decisions about retirement.

Mercer’s DC MOT report shows that 54% of employers do not offer retirement planning education, just one-third provide access to an independent financial adviser and even fewer (just 6%) fund employees’ access to independent financial advice.

While education is a key tool for helping members make better decisions, employers don’t have to shoulder the responsibility alone. Many pension providers offer educational resources that can be used to make offering high-quality guidance more manageable and cost-effective. 

Supporting better retirement decisions doesn’t require building complex programmes. Even small interventions can deliver great results, especially with the support of a specialist third party.

That might include: 

• Hosting retirement planning workshops 
• Offering access to digital financial planning tools 
• Signposting to trusted government resources 
• Funding or subsidising independent financial advice 

These steps can empower employees to understand and make the most of their retirement savings. Crucially, they also benefit the organisation by improving the likelihood that members retire comfortably and on time, reducing workforce planning risks and strengthening the returns on benefit spend.

It’s worth noting that the type of scheme an employer offers can influence what kind of support it can provide. For example, group personal pensions are regulated financial products, meaning employer guidance can easily strays into financial advice creating legal risk. Care is required!

Flexible retirement options aren’t going anywhere, and rightly so. They help workers access their savings in a way that suits them. By providing education on how to make the most of that freedom, employers have an opportunity to get more from the benefits they already offer. 

Mercer’s DC MOT is an audit of your company’s pension practices. It benchmarks your scheme and broader benefits package against those of other UK employers, and against Mercer’s view of best practice.

The results will help you understand how you stand compared to your peers, as well as whether your business can save money, increase value and reduce risk in your benefits offering.

You can receive a free copy of how your DC pension and broader benefits compare against this research and against other UK employers.  We call this review a DC MOT.

The results will help you understand how you stand compared to your peers, as well as whether your business can save money, increase value and reduce risk in your benefits offering.