UK government proposes a default lifetime pension income for private sector workers

The UK government has set out plans under which private sector workers saving for retirement would get a default option of an income for life. For now these are proposals under consultation, not finished rules.

What the change involves

Pensions Minister Torsten Bell announced two consultations on 3 November 2026 at the Association of British Insurers conference. The first covers "Guided Retirement" and how default pensions should work in practice. It was prepared jointly with the Financial Conduct Authority (FCA) and the Pensions Regulator. The second covers Retirement Collective Pension Schemes, with draft regulations that would allow such schemes to be used as a default option.

According to the government, Guided Retirement will require pension schemes to offer a default pension to people approaching retirement. This means a steady income for the rest of their lives, without having to make complex investment decisions on their own.

The government says around 17 million private sector workers saving in defined contribution (DC) schemes would benefit. In these schemes, people reach retirement with a pot of savings. Over the past 30 years most private sector defined benefit (DB) schemes, which guaranteed an income for life, have closed.

Choice remains

The government stresses that the decision stays with savers. Anyone who wants a different option will be free to choose it. The default pension is aimed at those who do not want to decide alone.

One of the mechanisms would be Retirement Collective Pension Schemes (RCPS), in which risk is shared among members and the money is managed for them. The government has also published its response to an earlier consultation on RCPS, along with draft regulations that would let providers offer them.

Why the government is proposing it

Thanks to automatic enrolment in workplace pension schemes, nine in 10 eligible private sector workers are now saving. In 2012 it was four in 10. However, the government points out that most of them reach retirement with a pot of savings rather than a guaranteed income.

According to the department, in 2025/26 around 46% of people accessing a pension pot for the first time withdrew all of it.

What happens next

The Guided Retirement consultation will run from 3 November to 22 December 2026. It covers initial proposals for secondary legislation under the Pension Schemes Act 2026. The final shape of the rules and the date they take effect are not yet known.

What this means for you

The changes affect people saving in workplace DC pension schemes, which includes many people employed in the private sector across the UK. There is nothing to do for now: this is a proposal under consultation, and the new rules are not in force. It is worth checking what type of scheme you are in and watching for information from your employer or pension provider. You can follow the consultation on GOV.UK.