UK Government Announces Consultations On "Resurrecting" Pensions

Key Takeaways

• The Government is consulting on Guided Retirement. Guided Retirement will require both trust- and contract-based pension schemes to provide a default pension for members approaching retirement.
• The Government is also consulting on the draft regulations for Retirement Collective Pension Schemes ("RCPS"), which pool risk amongst retirees.
• Members will still be free to choose different options under the "pensions freedoms" introduced in 2015. But together, the consultations show a clear nudge towards pension provision.

Guided Retirement

"Guided Retirement" is intended to ensure defined contribution pension scheme members do not have to make complex decisions about how to access their benefits at (and after) retirement. The consultation points to statistics that around two-fifths (about 40%) of defined contribution ("DC") occupational pension schemes offer no decumulation products.

The consultation proposes that:

• Until an individual has chosen to proceed with a different option, they will remain nominally allocated to a default pension. A default pension must normally include built-in longevity protection for life (such as an annuity or RCPS pension). This does not apply if the individual’s pots held by a provider total less than £10,000.
• Pensions cannot be designed in a way that would require an individual to purchase an annuity in the open market.
• Trustees and providers should make individuals aware of other options and give individuals the option to self-select one of these.
• In choosing a default option, providers must demonstrate that they have considered a range of factors, including inflation risk, protections for irreversible elements (including annuities and RCPS), spousal or dependant protection, and whether an RCPS would be an appropriate default, as part of a broad market assessment of options.
• Hybrid schemes that offer a mix of DC and defined benefit/collective pension benefits will only be required to provide a default pension if their benefits are solely DC. Therefore, DC additional voluntary contribution arrangements are not caught.

The projected compliance date is Summer 2029 (or Summer 2030 for "own trust" arrangements, and for master trusts planning to offer an RCPS as their default).

The consultation is open for views until 22 December 2026.

Retirement Collective Pension Schemes

RCPS are a form of collective defined contribution ("CDC") scheme, pooling longevity risk. They are designed to provide a regular income, with no need to make investment decisions. Crucially, benefits can be adjusted downwards (as well as upwards). But unlike existing "whole-life" CDC schemes, such as the Royal Mail scheme, they are retirement-only. Members join by transferring existing defined contribution rights (or pension credit rights) into the RCPS.

The Government has published its response to its 2025 policy consultation on RCPS and launched a new consultation on draft implementing legislation. Taking both documents together, the Government says that:

• Initially, Guided Retirement will be the only route through which members access RCPS.
• Prospective members must receive clear, scheme-specific information about the RCPS through a member booklet. Quotations can be calculated on both fixed (with a limited guarantee) and variable terms, noting that in both cases, benefit adjustments will not be guaranteed and will be subject to annual adjustment.
• A charge cap of 0.75% a year will apply to the collective fund. Alternatively, schemes may use a combination of a percentage charge and a flat fee of up to £25 per member per year.
• Schemes will be able to set "cohorting" terms, to balance fairness and practicality between different generations. A “cohort” is a group of members who, in each given year, will receive the same benefit adjustment which may vary between cohorts, under scheme rules.
• If a "triggering event" occurs—such as the Pensions Regulator moving to withdraw authorisation—schemes using the RCPS to meet their Guided Retirement duties must be notified. No new members should be transferred into the RCPS where the trustees are winding it up or closing it.

The consultation is open for views until 15 December 2026.

What Should You Be Doing?

Nothing at the moment, since implementation is not until 2029 at the earliest. However, trustees, employers, and commercial providers may wish to start giving this advance consideration given the significance of the proposed changes.

If you are thinking of offering an RCPS, this may be your final opportunity to influence the legislation through a consultation response.