Benefits 2026: What key trends can we expect?

Insights from Matthew Gregson, Executive Director at Howden, and Mark Futcher, Partner and Head of DC at Barnett Waddingham.

With the rollercoaster year that was 2025 out the way and reward teams now planning for 2026, our team looks at the trends we think will shape pensions and benefits this year.

Health benefits continue as the top priority and challenge.

Employee demand for health-related benefits continues to rise. Patient wait times on the NHS have not seen any significant improvement since the impact of COVID back in 2020 and have not met government targets since late 2015. As a result, employees are looking to their employers to offer private healthcare provision.

At the same time, costs are predicted to out-strip general inflation once again, putting significant pressure on budgets. Matthew notes, “If employers do nothing, they may have to stomach significantly higher costs at their next renewal.”

He highlights that for larger employers, whose costs are fundamentally linked to their employees’ claims experience, action can come in the form of targeted wellbeing interventions, aligned to claims data, or implementing more tactical policy design changes. But for many, cost control will be a persistent issue.

He adds that smaller employers can gain most by optimising benefits design to manage costs effectively. However, while there is huge value in offering the benefit, knowing the right aspects of coverage to reduce can often be a minefield for smaller employers, who are not wanting to impact that perceived value.

In short: costs and demand both continue to rise. Targeted wellbeing and smart policy design are key.

Pensions focus on performance and engagement.

Pensions continue to be the number one benefit, but 2026 is likely to see significant disruption in the Provider market, with a number of acquisitions and legislative changes.

From an employer perspective. we expect it to be a year of governance, care and maintenance. Mark says, “Employers shouldn’t expect huge changes this year – it’s about getting the basics right and keeping members engaged.”

He says auto-enrolment contributions have not risen as many had expected and are unlikely to increase in the near term, given the pressures of other rising costs.

Instead of funding, he suggests the smartest activity will focus on default investment fund design and member engagement.

This year could be the right time to review your provider or get more value from your current one. Either approach can have a significant impact on engagement and member outcomes, often at relatively little to no cost.

In short: 2026 should be a more stable year. Look to review or maximise you provider’s value.

Changing the Wellbeing and Mental Health approach

Mental health will continue to be a leading cause of workplace absence and productivity loss, particularly in times of economic uncertainty. With recent research highlighting the size of the economic black hole created by economic inactivity, the pressure is on employers to keep people healthy and engaged in the workplace, to prevent them “checking-out” or being absent for long periods.

To curb this trend, he says prevention, alignment with working practices and early intervention will be crucial. Line managers will be key to all of this, and re-focusing the role of managers to have better conversations with employees about mental health and signposting them to support is essential.

Mark adds that in addition to the role of the line manager, creating better business processes surrounding Occupational Health and absence management will be key to success. This is especially important for employers with Group Income Protection, who should be leveraging their early intervention services to maximise the changes of engagement and return to work.

In short: the productivity challenge will continue to grow. Shift the focus to line manager enablement.

Employee Engagement and Technology

With the increasing role of AI and concerns over the future nature of many roles, employee engagement with business priorities and embracing change will lead to success in 2026.

For employee benefits engagement and technology are also vital, with the need to educate employees and empower them to get the most value from the benefits offering. More often than not, benefits spend is wasted on poor communications and a poor user experience.

Although AI is attracting a great deal of attention, Matthew says the hype may be slowing as employers seek to define their approach better. “Employers will take their time rather than jump in,” he notes, emphasising that many current initiatives are really process automation rather than AI.

Mark adds that companies should focus on how AI can be deployed safely, and this should be integral to identifying opportunities with partners and providers, who can offer the reward team and employees alike a more engaging experience with whichever benefit they are using.

In short: AI is here to say, but take a measured approach internally, whilst leveraging provider support

Making the most of 2026

Overall, 2026 feels like a year for evolution rather than revolution. Smaller, tactical improvements will be important for dealing with the biggest challenges of cost (health), risk (wellbeing) and value (engagement).

As Matthew puts it, “Be smart about the three to five things that are achievable across your programme this year. To work out what they are, start with your strategy and goals for the programme and gather the data to tell you what your gaps are.”