Policy paper

Pension Schemes Act 2026: Guided Retirement guiding principles

Published 13 July 2026

Applies to England, Scotland and Wales

Background 

Automatic enrolment (AE) has successfully encouraged millions of people to save for their retirement. However, to date, that success has seen the UK create saving pots for most of today’s workers, but it does not yet have a pension system that supports people through retirement.  

Because most people do not take regulated financial advice, individuals approaching retirement are currently expected to make difficult judgements about how long they might live and how quickly they can afford to draw down their pension. The government has worked with the Financial Conduct Authority (FCA) to ensure more support is available in future, but notwithstanding this, individuals face complex decisions that are very high stakes. Poor decisions at this stage can significantly affect whether a pension provides income throughout later life.   

The government is therefore committed to reforming the pensions system to improve retirement outcomes, including by boosting pension adequacy, while also:  

• overcoming complexity

• reducing the risks borne by individuals

• improving the sustainability of retirement incomes

Guided Retirement is a central part of this reform agenda. It will ensure the vast majority of people are offered default pensions which are designed to provide a sustainable pension income, without the individual needing to make complex decisions unless they choose to do so.    

The government has also launched an independent Pensions Commission to examine the long‑term adequacy, fairness and sustainability of the UK pensions system. The Commission has recently published an interim report, which reinforces the well‑evidenced case for improving outcomes delivered through default pensions.  

The Guided Retirement requirements 

The Pension Schemes Act introduces duties on trustees to provide well designed default pensions through a range of measures and subsequent regulations will further supplement these requirements. The FCA are also required to introduce rules which so far as possible achieve the same outcomes, to ensure default pensions are made available by the workplace pensions they regulate, so the principles set out in this paper should be considered to apply across the whole of the market. These measures and regulations will provide clarity about the nature of default pensions. However, they are not intended to be overly prescriptive. Pension schemes will need to have strong and effective governance in place to ensure they are developing appropriate default pensions to meet the needs of their members.  

The legislative and regulatory framework will require schemes to design and make available one or more default pensions – and to review these on a regular basis.  

The government believes effective communication is important. This means that trustees and scheme managers must make sure their members are given information about the default pension(s) and other options they have in place.  

Key principles and expected outcomes for default pensions 

No requirement for complex decision-making by the member 

Decisions about how to use pension savings to generate a retirement income are highly complex, involving choices about investment approaches, sequencing of withdrawals and managing income over time. For the vast majority of people these decisions are daunting, and in practice many are unable to engage with them effectively. This complexity can lead to poor outcomes. The FCA’s Financial Lives 2024 survey found that over half (52%) of adults contributing at that time to a Defined Contribution (DC) pension had low, or very low, levels of pension engagement, and 31% are not even aware that their DC pot is invested. 

The government wants to ensure that savers are able to achieve good retirement outcomes without needing to navigate complex financial decisions or develop specialist expertise. The Guided Retirement requirements will mean the pensions industry must do the heavy lifting on behalf of members. The requirements place responsibility on schemes to design and manage appropriate default pensions in members’ interests. For most savers, the only decision required will be when to access their pension and whether to remain in the default pension or choose an alternative. Those who wish to take a more active role will continue to be free to shop around and select a different retirement solution that suits their preferences.  

This approach is intended to help secure a more sustainable retirement income for members and lower the risks of bad outcomes.  

The requirements in the Act also ensure that decumulation decisions made by pension scheme trustees and managers are driven by the interests of their members. 

Protection against longevity risk 

A critical decision for members is how to manage their assets to ensure adequate retirement income that lasts through their later life.  

The Money and Pensions Service (MaPS) 2026 MoneyView survey has found that half of working age adults (50%) have no retirement plan, mirroring the proportion who lack pension understanding. This in turn risks last-minute decisions which could see pensions assets being eroded quicker than expected. The FCA’s Financial Lives survey 2024 explored with adults who had decumulated a DC pension in the last 4 years what factors they had considered when deciding how to take their money. Under half (43%) had considered how long they were likely to live, only 40% had considered how much money they would need to last them in retirement, and just 26% had considered the effect of inflation. 

The same survey also found that most non-retirees (68%) expect to use their pension income to fund their retirement^{[footnote 1]}. But when considering those who had started taking their pension, just a third (33%) of those who partially encashed a DC pension in the 4 years to May 2024, strongly agreed that they were confident of having enough assets to last through retirement. This confidence was shared by just 3-in-10 of those who fully encashed a DC pension in the same period. 

There is also a wide range of uncertainty in life expectancy, exacerbating the risks people face when trying to make their pension last. A man reaching State Pension age in 2025 has a 25% chance of dying before the age of 79 and a 25% chance of living beyond 91 years old. A woman retiring at State Pension age in 2025 has an average life expectancy of around 89, but a 1-in-10 chance of reaching age 98. 

The government therefore considers protection against longevity risk to be a crucial element of default pensions, and so they must provide a retirement income that lasts throughout that retirement. Trustees and scheme managers, however, will have flexibility about how to deliver this and so default pensions could incorporate different phases, such as a flex then fix approach.  

This will inevitably involve wrestling with trade-offs – not least between flexibility and risk. However, savers making their own decisions inevitably face the same trade-offs. Default pensions will reduce the risks and complexity entailed by members having to make the decisions for themselves, while ensuring each individual absolutely has the option of doing so.  

Freedom of choice 

The potential benefits to individuals of having those with direct expertise or the ability to buy in expertise to design pension options, are significant. The government believes these benefits should be available to everyone.  

On the other hand, there are a significant number of people who value the freedom to choose their own options. These freedoms are not being eroded by the introduction of default pensions. The government recognises some people may want to make their own decisions, particularly if they have higher levels of pension wealth or more complex circumstances. Alongside introducing default pensions, the government is committed to ensuring that individuals can get the right support with their pension choices, including through high quality financial advice, Pension Wise, and the introduction of targeted support, where it is made available.  

Consent 

We know that a significant proportion of people do not engage with their pensions. According to the FCA’s Financial Lives 2024 survey, 59% of adults^{[footnote 2]} who had decumulated a DC pension in the previous 4 years reported receiving financial advice on how to take their pension before decumulating, while 38% did not. There is one point however where the member needs to engage with the pension scheme – when they are seeking to access their assets.  

The government sees this as an opportune time to maximise engagement to fully explain the default pension and spell out that there are other options available. At this point, members will need to agree to start receiving payment via the default pension. This is the key consent moment. If a default pension includes different phases (such as a flex then fix approach), members should be informed at the point of access and throughout their pensions journey about when their ability to take a different choice would become restricted, but schemes will not be expected to seek consent multiple times.

1. The 2024 Planning and Preparing for Later Life survey also found a clear majority of people thought about their pension as a source of income with 72% choosing either a guaranteed income (46%), a flexible income (20%) or a flexible income followed by a guaranteed income (7%) as the only or most important thing for their pension to provide. ↩

2. These proportions are likely to include some who did not receive regulated advice, and instead received information or guidance from, for example, their pension provider or a formal guidance source such as Pension Wise or MoneyHelper. ↩