The figures have prompted renewed discussion among financial advisers about the growing responsibility individuals now carry for funding their retirement, as workplace pension arrangements continue to evolve.
Official statistics published by the Department for Work and Pensions (DWP) show a marked shift in the types of private pensions being accessed for the first time. According to the DWP, the proportion of people receiving a lump sum or another Defined Contribution (DC) product increased from 37% (280,000 people) during the 2016/17 financial year to 49% (410,000 people) in 2025/26.
The figures highlight an ongoing transition away from Defined Benefit (DB) pensions, which provide a guaranteed retirement income, towards Defined Contribution arrangements, where retirement income depends on the value of an individual’s pension savings and investment performance.
Defined Contribution Pensions Continue to Replace Guaranteed Retirement Income
According to Samuel Mather-Holgate, managing director and independent financial adviser at Mather and Murray Financial, the latest figures illustrate an accelerating shift in the UK’s pension landscape.
He said the country is moving away from traditional Defined Benefit pensions, where retirement income was guaranteed until death, towards Defined Contribution pensions, where retirement income depends on the size of an individual’s pension fund and market conditions.
Under a Defined Benefit pension, employers guarantee the level of retirement income. By contrast, Defined Contribution pensions rely on personal contributions, employer contributions, investment returns and fund charges, meaning retirees bear the investment risk rather than their employer.
Mather-Holgate said workers with Defined Benefit schemes, including final salary arrangements and career-average schemes such as the NHS CARE pension, continue to benefit from retirement income security that many private sector employees are unlikely to receive in future.
He also said many workers have effectively moved from a system based on guaranteed retirement income to one centred on individual pension savings without fully appreciating the difference between the two.
Adviser Urges Regular Pension Reviews as Retirement Responsibility Grows
According to Mather-Holgate, the UK is entering what he described as an era of “pension inadequacy”, with responsibility for retirement planning increasingly shifting from employers to individuals.
While he said automatic enrolment has encouraged millions of people to save into workplace pensions and benefit from employer contributions, he argued that minimum automatic enrolment contribution levels are unlikely on their own to provide sufficient income for retirements that could last 30 or even 40 years.
He said automatic enrolment should represent the starting point for retirement planning rather than the entire strategy, adding that a lack of pension education has led many people to rely solely on minimum workplace contributions. Mather-Holgate encouraged employees to contribute as much as possible to workplace pension schemes in order to maximise employer matching contributions, stating that failing to do so is effectively turning down part of their pay.
He also advised people to review their pension arrangements regularly, particularly following major life events such as changing jobs, receiving a pay rise, divorce, inheritance or approaching retirement.
Referring to the latest DWP figures, Mather-Holgate said Britain is now formally moving from guaranteed retirement incomes towards retirement outcomes based on individual savings. He added that, despite ongoing cost of living pressures, people should save as much as they are able because retirement income is increasingly determined by the amount accumulated in their pension over time.
