Mike Ambery (C) Aviva

As part of the UK Government consultation, around 17m private sector workers now saving into a pension will be given the option of an income in retirement, closing the gap with pensions seen in the public sector, under government plans for default pensions launched today.

The Government said in a statement that it is “now acting to resurrect the option of genuine pensions for all private sector workers. Guided Retirement will bring back pensions that pay an income, often inflation protected, for the entirety of your retirement without the need for complex financial decisions.”

It will combine a “sustainable state pension” that is the foundation of later-life income, real pensions that all workers pay into during their working lives to enjoy in retirement, and a new national care service that will be there for people when they need it.

Minister for Pensions Torsten Bell announced two consultations during a speech at the Association of British Insurers (ABI) Long-Term Savings Conference. The consultation into guided retirement was published jointly with the Financial Conduct Authority (FCA) and The Pensions Regulator, on how default pensions should work in practice.

It will require pension schemes to provide a default pension for savers approaching retirement. After years of saving into a defined contribution pension, savers will have the option of a stable income for the rest of their lives, without having to become investment experts overnight.

According to the DWP, in 2025/26 around 46% of first-time pension pot accesses involved the pot being fully withdrawn. This is not just a UK challenge, with many countries, including Australia, leaving individuals facing risk and fear in retirement.

It is expected that guided retirement will close that gap by requiring pension providers to offer a genuine pension that protects people from the risk of outliving their savings. The guided retirement consultation sets out initial proposals for secondary legislation under the Pension Schemes Act 2026. It will run from 3 November 2026 to 22 December 2026. It was developed by the DWP, His Majesty’s Treasury, the FCA and The Pensions Regulator.

The government is also publishing its response to the policy consultation on Retirement Collective Pension Schemes (RCPS) today, alongside draft regulations to enable providers to offer them as a default pension. The consultation looked into pooling risk to deliver stability and growth, and providing a fully managed pension people can rely on for life.

The consultations set out how default pensions, including Retirement Collective Pension Schemes, should be designed and delivered, how schemes should support members approaching retirement, and how to keep the framework practical. They seek views on these plans.

Helen Forrest Hall, chief strategy officer at the Pensions Management Institute, said: “We welcome the Government’s focus on helping defined contribution savers achieve more secure and sustainable retirement incomes. 

“Simplicity, stability and savers must be at the heart of pensions policy. Many people would benefit from not being forced to make complex decisions at and throughout their retirement. 

“Achieving that will require a framework that is deliverable in practice, supported by strong governance, clear member protections and sufficient certainty for trustees and providers to make the best decisions for members.”

Mike Ambery, director of wealth policy at Aviva, said: “This consultation marks a milestone in the evolution of retirement income. Default guided retirement options should be a positive step for savers, helping people who don’t have access to financial advice navigate complex choices and achieve better retirement outcomes.

“We hope to see a framework that focuses on good member outcomes, supports innovation and allows providers to develop a range of solutions that reflect the different needs of savers. Clear alignment between the FCA and DWP will be essential if customers are to receive consistent support and confidence throughout their savings and retirement journey.”

Minister for Pensions Torsten Bell said: “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.

“We are resurrecting proper pensions for private sector workers, guaranteeing them the option of an income that lasts throughout retirement and in many cases protection against the rising cost of living, things public sector workers take for granted. We are going to give pensions back to the people who are working hard and saving for their retirement.”

Therese Chambers, executive director at the FCA, said: “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.

“The Government is publishing its response to the policy consultation on RCPS today, alongside draft regulations to enable providers to offer them as a default pension.”

Richard Knox, executive director of strategy, policy and analysis at The Pensions Regulator (TPR), said: “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. Schemes should engage with DWP’s consultation on guided retirement and help make these reforms a success.”