The UK government has proposed pension reforms that would give around 17 mn private sector workers access to retirement income designed to last for life, bringing workplace pension provision closer to the arrangements traditionally available in the public sector.
Announced by the Department for Work and Pensions (DWP) the Guided Retirement proposals would require defined contribution (DC) pension schemes to offer a default retirement income option.
- Around 17 mn private sector workers could gain access to default pensions providing income throughout retirement.
- Guided Retirement would require defined contribution schemes to offer managed retirement income options, including collective pensions.
- Two consultations launched on November 3, 2026, will examine the proposals, with the Guided Retirement consultation closing on December 22.
The government also plans to introduce Retirement Collective Pension Schemes (RCPS), which would pool investment and longevity risks to provide managed retirement income, potentially with inflation protection.
Savers would remain free to choose other retirement arrangements.
Why the government is changing workplace pensions
Most private sector defined benefit (DB) schemes, which traditionally provided inflation-protected income for life, have closed over the past 30 years.
Automatic enrolment has increased pension participation, with nine in 10 eligible private sector workers now saving into workplace pensions, compared with four in 10 in 2012.
Most of these workers save through DC schemes. Unlike DB pensions, these typically provide an accumulated savings pot rather than a guaranteed retirement income.
Members must decide how to withdraw, invest or convert their savings into income, often without specialist financial knowledge.
The government wants pension schemes to take greater responsibility for these decisions by offering a managed retirement option.
Minister for Pensions Torsten Bell announced the proposals at the Association of British Insurers (ABI) Long-Term Savings Conference.
Private sector workers deserve a much better deal when it comes to pensions. They are doing the right thing and saving for retirement, but when they get there too many are left without a genuine pension.
Torsten Bell, Minister for Pensions
He said the government wanted to restore the option of lifelong retirement income, including protection against rising living costs in many cases.
The reforms form part of a wider policy agenda covering the State Pension, workplace retirement provision and a proposed National Care Service.
How Guided Retirement would work
Guided Retirement would require pension schemes to provide a default income option for members approaching retirement.
Instead of independently managing investments and withdrawals, savers could receive a managed pension intended to provide income throughout their remaining lives.
The proposals respond partly to concerns about how DC pension savings are currently accessed. In 2025/26, approximately 46% of first-time pension pot accesses involved the entire pot being withdrawn.
The government considers this evidence of the need for better support when savers move from accumulating pension assets to drawing retirement income.
Similar challenges exist in other DC-based pension systems, including Australia, where individuals also bear responsibility for managing retirement savings and the risk of outliving them.
Under Guided Retirement, schemes would be required to offer an income option intended to address longevity risk. Members who prefer another approach would retain that choice.
Collective pension schemes would pool retirement risks
Retirement Collective Pension Schemes are a central element of the proposed framework. Unlike conventional individual DC arrangements, collective schemes would pool risks across members, allowing investment and longevity risks to be managed collectively.
The government expects this structure to support more stable retirement income and investment growth while reducing the need for individual investment decisions.
RCPS could therefore provide some features associated with traditional DB pensions without adopting the same benefit structure.
The DWP published its response to an earlier RCPS policy consultation on November 3, alongside draft regulations that would allow collective schemes to operate as Guided Retirement defaults. The detailed requirements remain subject to consultation.
FCA and Pensions Regulator back default retirement options
The Guided Retirement consultation was developed by the DWP, HM Treasury, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR). It covers the design and delivery of default pensions, support for members approaching retirement and the practical requirements for pension providers.
Therese Chambers, executive director at the FCA, said the proposals would make retirement decisions easier.
People should not have to navigate complex pension decisions alone. Guided retirement will offer a simpler way to turn savings into income, regardless of which workplace pension people have.
Therese Chambers, executive director at the FCA
Richard Knox, TPR’s executive director of strategy, policy and analysis, also supported better-designed default options.
“People need more help to turn a pension pot into a sustainable retirement income, and well-designed default options at retirement will help people navigate these complex and important financial decisions,” Knox said. He urged pension schemes to participate in the consultation.
Pension consultations close in December 2026
The government launched two consultations on November 3. The Guided Retirement consultation sets out proposals for secondary legislation under the Pension Schemes Act 2026. It runs until December 22, 2026.
A second consultation examines draft regulations for Retirement Collective Pension Schemes and their use as default retirement options.
The proposals would change how DC pension providers support members at retirement, requiring them to offer managed income arrangements while preserving savers’ freedom to choose alternatives. The final framework will depend on the consultation outcomes and subsequent regulations.
