Millions of UK private-sector workers could be offered a guaranteed income for life under government proposals aimed at helping retirees make use of their pension savings. The proposed guided retirement regime would provide a default option, with payments often linked to inflation, while leaving savers free to withdraw their money or invest it elsewhere.
The government says the changes would affect 17 million workers who are saving into a pension. The proposal follows the decline of final salary schemes, which promised a set income for life, and the removal of the requirement to buy an annuity. Since then, many people have reached retirement with a pension pot and had to decide how to use it.
Auto-enrolment, introduced in October 2012, requires employers to enrol workers aged 22 and over in a pension scheme and contribute to it. Workers can opt out, but the government says nine in 10 eligible private-sector workers now contribute, compared with four in 10 in 2012.
The government says nearly half of the pension pots first accessed in 2025-26 were emptied. That can leave retirees at risk of outliving their savings and relying on the state pension.
Pensions minister Torsten Bell said the proposals would give private-sector workers the option of an income lasting throughout retirement, with protection against rising living costs in many cases. He described the plan as restoring a form of pension income that public-sector workers commonly have.
Yvonne Braun, the Association of British Insurers’ director of long-term savings policy, said the scheme could simplify decisions about accessing pensions, but stressed that people should retain the freedom to make their own choices. Annuities are no longer compulsory, although sales have risen alongside higher returns and changes to inheritance tax rules that have encouraged some wealthy people to move money out of pensions.
Sources: The Guardian Business.