The government has today released details of consultations on its default pensions proposals and ‘guided retirement’.
The plan aims to hand private sector workers a pension that lasts throughout retirement, something public sector workers take for granted, the government said.
It said 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 added: “Automatic enrolment got private sector workers saving, now the next step in rebuilding workplace pensions is a default pension for life.”
Under the plans, DC savers will be given a new option, offering many of the benefits of DB pensions, with the introduction of retirement collective pensions.
The government 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 government said.
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.”
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.”
The Guided Retirement consultation sets out initial proposals for secondary legislation under the Pension Schemes Act 2026. It will run from 3 November to 22 December.
Steve Webb, LCP partner said: “The basic idea of ‘guided retirement’ is welcome. But there is a danger that the government’s hostility to pension freedoms will lead them to promote ‘lifetime income’ solutions too heavily. If people want a secure income for life, the option of buying an annuity has always been there, but very few people freely choose it.
“It is vital that the focus on retirement income does not destroy ‘freedom and choice’ in pensions.”