Government plans default lifetime pension income for private sector workers

The UK government set out plans for default pensions in the private sector on 3 November 2026. According to the Department for Work and Pensions (DWP), around 17 million private sector workers who are currently saving for retirement are to get the option of a steady income in later life.

What is changing

Over the past 30 years, most private sector Defined Benefit (DB) schemes, which provided a lifelong income that was often protected against inflation, have closed. Thanks to Automatic Enrolment, nine in ten eligible private sector workers are now saving, up from four in ten in 2012. However, most save into Defined Contribution (DC) schemes, which leave them with a pot of savings rather than a guaranteed income.

The government wants to change this with a programme called "Guided Retirement". Pension schemes would be required to offer a default pension to people approaching retirement. Savers would have the option of a stable income for life, without having to make complex investment decisions themselves.

The government says that in 2025/26, around 46% of first-time accesses to a pension pot involved the pot being withdrawn in full.

Collective pension schemes

One of the solutions is to be Retirement Collective Pension Schemes (RCPS). They pool risk between members, which is intended to deliver stability and growth and a fully managed pension. The government has published its response to the RCPS consultation, along with draft regulations that would allow providers to offer them as a default pension.

Choice is to remain with savers: those who prefer a different option will be free to choose it.

Consultations

Pensions Minister Torsten Bell announced two consultations at the Association of British Insurers conference. The first covers Guided Retirement and was prepared jointly with the Financial Conduct Authority (FCA) and the Pensions Regulator. The second covers draft regulations on RCPS. The Guided Retirement consultation runs from 3 November to 22 December 2026. It is based on the Pension Schemes Act 2026 and covers initial proposals for secondary legislation.

Bell said the government wants to guarantee private sector workers the option of an income for life. Therese Chambers of the FCA said people should not have to face complex pension decisions alone.

What this means for you

These are proposals under consultation, not rules in force, and they do not change the position for anyone straight away. If you work in the private sector and save through Automatic Enrolment in a DC scheme, the changes could in future affect how you turn your savings into an income when you retire. The details depend on the outcome of the consultations and later regulations.