New plans “resurrect” genuine pensions for millions of private sector workers
Around 17 million 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.
- Private sector workers to enjoy a pension that lasts throughout retirement, something public sector workers take for granted.
- Automatic enrolment got private sector workers saving, now the next step in rebuilding workplace pensions is a default pension for life.
- DC savers to be given a new option, offering many of the benefits of DB pensions, with introduction of retirement collective pensions.
Over the last 30 years, the vast majority of private sector Defined Benefit (DB) pension schemes, that once provided an inflation protected income for life in retirement, have closed.
The introduction of Automatic Enrolment means nine in 10 eligible private sector workers are now saving, up from four in 10 in 2012. But the vast majority are saving into Defined Contribution (DC) pensions and are left entering retirement with a savings pot rather than a route to a genuine pension that provides a secure income that lasts throughout their later life.
The Government 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.
This is the latest part of the Government’s agenda to fundamentally reform the UK’s offer to today’s workers who are tomorrow’s pensioners. It combines 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 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 sectors workers, guaranteeing them the option of an income that last 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.
Speaking at the Association of British Insurers (ABI) Long-Term Savings Conference, Minister for Pensions Torsten Bell announced two consultations:
- Guided Retirement, published jointly with the Financial Conduct Authority (FCA) and the Pensions Regulator, on how default pensions should work in practice.
- Retirement Collective Pension Schemes, on draft regulations so these schemes can be used as a default pension under Guided Retirement.
Guided Retirement will require pension schemes to provide a default pension for savers approaching retirement. After years of saving into a DC pension, savers will have the option of a stable income for the rest of their lives, without having to become investment experts overnight.
The need for this is clear. In 2025/26, around 46% of first-time pension pot accesses involved the pot being fully withdrawn and this is not just a UK challenge, with many countries, including Australia leaving individuals facing risk and fear in retirement. 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.
Pensions schemes will do more of the heavy lifting for their members, with, for example, Retirement Collective Pension Schemes (RCPS) pooling risk to deliver stability and growth and providing a fully managed pension people can rely on for life.
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.
Choice remains at the heart of the approach. For those savers who want a different option, they will always be free to choose. But for those who do not want to navigate complex decisions alone, Guided Retirement will ensure they get a good deal and a reliable income for the whole of their retirement.
The consultations sets 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. It seeks views on these plans.
Therese Chambers, executive director at the Financial Conduct Authority, 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.
TPR Executive Director of Strategy, Policy and Analysis, Richard Knox, 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.
Additional information
- Developed by DWP, HMT, FCA and TPR, 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.