The changes would introduce a system known as Guided Retirement, offering savers a default route from accumulated pension savings to regular retirement payments. According to the DWP, the initiative is intended to narrow the gap between private sector arrangements and the lifelong retirement income traditionally available to many public sector workers.
Why the Government Wants To Change Private Sector Pensions
Over the past 30 years, most private sector defined benefit (DB) pension schemes have closed. These arrangements traditionally provided employees with an income for life, often protected against inflation. Their decline has left many workers relying instead on defined contribution (DC) pensions.
The introduction of automatic enrolment significantly increased workplace pension participation. According to the DWP, nine in 10 eligible private sector workers are now saving into pensions, compared with four in 10 in 2012.
Yet participation does not necessarily mean workers will receive a regular income throughout retirement. Most DC schemes provide individuals with accumulated savings, leaving them to decide how those funds should be used once they stop working.
Government figures highlight the scale of that challenge. During 2025/26, approximately 46% of first-time pension pot accesses involved the entire pot being withdrawn. Minister for Pensions Torsten Bell said private sector employees deserved better arrangements after spending their working lives saving for retirement.
“We are resurrecting proper pensions for private sectors workers,” Bell said, describing plans to offer lifelong income and, in many cases, protection against rising living costs.
The Government believes pension providers should take greater responsibility for helping members manage retirement income, rather than leaving individuals to navigate complex financial decisions independently.
How Guided Retirement Would Work for Pension Savers
Under the proposed Guided Retirement framework, pension schemes would be required to provide a default pension option for members approaching retirement. Rather than simply receiving access to accumulated savings, individuals would have the option of a stable income designed to continue throughout their later lives.
According to the Government’s announcement, Retirement Collective Pension Schemes (RCPS) could form part of this approach. These arrangements would pool risks and provide professionally managed retirement income, offering some benefits associated with traditional defined benefit pensions.
Participation in a default arrangement would not remove individual choice. Savers who preferred another retirement option would remain free to select one.
Therese Chambers, executive director at the Financial Conduct Authority, said people should not have to manage complicated pension decisions without support. She said Guided Retirement would provide a simpler route from pension savings to income, regardless of the workplace scheme involved.
Richard Knox, executive director at The Pensions Regulator, also supported the development of well-designed default options to help individuals convert pension savings into sustainable retirement income.
The proposals are not yet finalised. The DWP, working alongside HM Treasury, the Financial Conduct Authority and The Pensions Regulator, has launched a consultation covering the practical design and delivery of Guided Retirement.
The consultation runs from 3 November to 22 December 2026. Draft regulations have also been published to enable Retirement Collective Pension Schemes to operate as default pensions under the proposed framework.
