UK pensions experts have warned new plans to introduce default pensions for those saving into defined contribution (DC) workplace pensions must factor in flexibility and not narrow the choice for pension savers.
The Department for Work and Pensions, along with the FCA and The Pensions Regulator, launched a consultation yesterday (3 November) on proposals for a Guided Retirement framework in both contract and trust-based workplace pension schemes.
The consultation is in response to the success of automatic enrolment, which has led to a significant increase in participation in DC pensions, and aims to simplify the point of retirement by introducing default pensions, providing a straightforward route into retirement for the mass market.
Alongside the consultation, the government published its response to the public policy consultation on Retirement Collective Defined Contribution pension schemes – now referred to as Retirement Collective Pension Schemes (RCPS) – that ran at the end of last year. As a result, the government is proposing collective pensions will be created alongside default retirement income routes for members of workplace pension schemes.
AJ Bell public policy director Tom Selby described the RCPS as “a reheated version of old-style with-profits pension policies, with members offered a target retirement income that could be changed depending on the performance of the underlying investments”.
He said: “It will be years before these plans become a reality and a lot of work will need to be put into the detail, determining exactly how these schemes will be setup and how the potential benefits and drawbacks can be communicated to savers.
“Once in place they will provide another alternative to the existing at-retirement options available: a flexible income through drawdown; guaranteed income from an annuity; or a combination of both.”
Selby said it will be vital that pension savers are given clear, balanced information about all the options available, and that the risks of RCPS are explained clearly as well as the benefits.
“They must be given the time, space and ability to make an informed decision based on their individual circumstances, rather than being funnelled into a solution that may not be right for them.
“Ultimately, pension savers must retain the freedom and flexibility to choose how they use their retirement savings,” he added. “The goal must be to widen genuine choice for pension savers, not quietly close it down.”
Jon Greer, head of retirement policy at Quilter, said: “Default retirement solutions can help, particularly for those who do not want to navigate complex decisions themselves. But they should be a safety net rather than a straitjacket. People must retain the flexibility to choose a different approach and access personalised advice where appropriate.’
Emma Furlonger, managing director of workplace and retail intermediary at Standard Life, said guided retirement has the potential to improve outcomes for people who need greater support when accessing their pension savings, adding that the pensions system should work for people who engage as well as those who don’t.
However, she said a default should provide a guardrail rather than become a substitute for engagement.
“People should understand the approach being offered, have meaningful opportunities to consider whether it remains right for them and retain the freedom to choose an alternative,” she said.
The consultation closes on 22 December 2026.
