Guided Retirement plan gives savers default pension income for life with opt-out
Pension schemes would have to offer savers nearing retirement a default income for life, with a right to opt out, under plans open to responses until 22 December.
Savers nearing retirement will be offered a default pension paying an income for life, under Guided Retirement plans the government opened for consultation on Tuesday.
Around 17 million private sector workers now saving into a pension would get the option, rather than reaching retirement holding only a pot, the Department for Work and Pensions said.
Most of them save in defined contribution schemes, which leave a pot at the end, while most private sector defined benefit schemes paying a lifetime income have closed over 30 years.
In 2025/26, around 46% of first-time pension pot accesses involved the pot being fully withdrawn, the department said, citing this as the reason for the change.
Guided Retirement will require pension schemes to provide a default pension for savers approaching retirement, under secondary legislation made through the Pension Schemes Act 2026.
The consultation runs from 3 November to 22 December 2026, and it is open for responses on how default pensions should work in practice.
Yes. Savers who want a different option will always be free to choose, the department said, so the default is an option rather than an obligation.
Under the guiding principles, members will need to agree to start receiving payment through the default pension, which is described as the key consent moment.
The principles say default pensions must provide an income lasting throughout retirement, though schemes could use different phases, such as a flex then fix approach.
Pensions minister Torsten Bell said the government was “resurrecting proper pensions for private sectors workers”, guaranteeing the option of an income that lasts throughout retirement.
The FCA’s Financial Lives 2024 survey found 52% of adults contributing to a defined contribution pension had low or very low levels of pension engagement.
Separately, the Money and Pensions Service 2026 MoneyView survey found half of working age adults (50%) have no retirement plan.
Therese Chambers, an executive director at the FCA, said Guided Retirement “will offer a simpler way to turn savings into income, regardless of which workplace pension people have”.
Richard Knox, executive director at the Pensions Regulator, said well-designed default options at retirement “will help people navigate these complex and important financial decisions”.
A second consultation covers draft regulations so Retirement Collective Pension Schemes, which pool risk to provide a fully managed pension, can be used as a default.
The government’s pensions roadmap works back from 2030, saying trustees will have to offer a default guided retirement product, which will also apply to group personal pensions.
The Guided Retirement consultation closes on 22 December 2026.
