The government proposed a guided retirement scheme that would offer millions of private sector workers a default option intended to provide a guaranteed pension income for life, while allowing them to withdraw or invest their money elsewhere. The proposals would affect 17 million workers investing in a pension, the government said.
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The government said its proposals would affect 17 million workers investing in a pension, most of whom do not enjoy the benefits of a final salary scheme. Over the past 30 years, the majority of final salary pension schemes offering a set payout for life have closed, leaving workers to arrive at retirement with a pot of money they must decide what to do with. George Osborne scrapped the obligation to buy an annuity.
Proposals outlined by the government on Tuesday would bring in a default option for retirees, designed to ensure that the money they have saved provides them with an income for life. Under the guided retirement regime, people would still be able to withdraw their money or invest it elsewhere, but they would also be offered a simple option, with payments often linked to inflation.
The government said nearly half the pension pots accessed for the first time in 2025-26 were emptied out, leaving people at risk of outliving their savings and reliant on their state pension. Auto-enrolment, introduced in October 2012, means employers must put every worker aged 22 and over into a pension scheme and make a company contribution; workers can opt out, but nine in 10 eligible private sector workers are now making contributions, up from four in 10 in 2012.
The pensions minister, Torsten Bell, said private sector workers deserve a much better deal and are doing the right thing by saving, but too many are left without a genuine pension. He said the government is resurrecting proper pensions for private sector workers, guaranteeing them the option of an income that lasts throughout retirement and in many cases protection against the rising cost of living.
Yvonne Braun, director of long-term savings policy at the Association of British Insurers, said she believed the proposed scheme had the potential to simplify decisions about accessing pensions but it was important that people continue to have the freedom to make their own decisions.
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