"Genuine pensions": Government consults on guided retirement and collective decumulation

The Government has published two linked sets of proposals to shape how DC savers turn their pots into retirement income:

• a joint policy consultation on guided retirement, covering both trust-based and contract-based schemes; and
• a response to its 2025 consultation on retirement CDC schemes, now dubbed retirement collective pension schemes (RCPSs), together with a consultation on draft regulations.

The Government asks that the two be read together, and with good reason. An RCPS is designed to be one of the options available as a default under guided retirement, and guided retirement is to be the only route into an RCPS.

The proposals do not change the direction of travel, but together they give a much clearer picture of what will be expected of trustees and providers. Key points are summarised below.

Guided retirement

The Pension Schemes Act 2026 will create requirements for DC schemes to offer "default pension benefit solutions". These are arrangements for paying a retirement income to members who do not choose an alternative. In July 2026 the Government published a paper setting out guiding principles, as reported in our Autumn 2026 Pensions Planner. The new consultation (conducted jointly with The Pensions Regulator and the Financial Conduct Authority) fleshes out the principles.

 Notable points include the following.

• Scope: Master trusts, own-trust DC schemes and contract-based workplace schemes will be in scope. Hybrid schemes will generally be in scope only for members whose benefits are solely DC. DB schemes with a DC AVC section will be out of scope; likewise SSASs, executive schemes, cash balance schemes and whole-life CDC schemes.
• Members: In-scope members will include deferred members and members already in drawdown who are not yet in a default solution. Deferred pots of £1,000 or less which meet the small pots consolidation criteria will be excluded. No exemption is proposed for large pots.
• Longevity protection: A default will have to protect against the risk of outliving savings in cases where a member's pots with the provider exceed £10,000 (net of any tax-free cash). In such cases, drawdown on its own will not suffice.  Suitable arrangements might include an RCPS, bulk annuities, individual annuities and managed drawdown with a later annuity.
• Design: Schemes will have to follow a prescribed process when designing default solutions. They will have to collect information about their membership, determine members' needs, identify any distinct cohorts, and design defaults accordingly. Prescribed factors will have to be considered, including inflation risk, flexibility, income delivered, protection where a step cannot be reversed, dependants' benefits and the RCPS option. Providers will  have to look at what the wider market offers, not just their own products.
• Consent: A member will consent once, when they agree to access their benefits. That consent will cover every phase of the default. But prior to any irreversible step, eg buying an annuity, the scheme will have to use best endeavours to re-engage the member. And the Government is seeking views on a possible cooling-off period, of at least 30 days, for default solutions.
• Transfers: A trust-based scheme (the principal scheme) will not necessrialy have to offer a default solution itself. Instead it may transfer retiring members, with their consent, to another scheme willing to provide one (a receiving scheme). This option will be available if in-house provision is not reasonably practicable, or if members are likely to achieve better outcomes elsewhere. The receiving scheme will have to be authorised by TPR or run by an FCA-authorised firm. Principal schemes will have to consider a range of receiving schemes before choosing, so that the choice is driven by members' needs rather than commercial relationships. There will need to be a transfer agreement, and the principal scheme will be responsbile for checking that the arrangement remains suitable for future cohorts. 
• Communications: There are detailed proposals for member communications during accumulation, in the run-up to retirement, at the point of access and during decumulation. For trust-based schemes, retirement-focused communications will begin five years before normal minimum pension age.
• Governance: Trustees will have to maintain and publish a "Pension Benefits Strategy", with supporting evidence and a member-friendly summary. Contract-based providers will be governed through the FCA's rules, including the Consumer Duty.
• Costs and charges: The Government plans to extend the value-for-money regime to decumulation in due course, and will consider whether charge caps should apply to defaults other than RCPSs.
• Timing: Commercial master trusts and contract-based schemes will have to comply by summer 2029, and single-employer trusts by summer 2030. A master trust or contract-based scheme which plans to use an RCPS as its default may have until summer 2030, if specified conditions are met. 

The consultation closes on 22 December 2026. The Government expects to consult on draft regulations and FCA rules in Q3 2027.

Retirement collective pension schemes

As explained in our Winter 2025 Pensions Planner, an RCPS will pool the pots of retiring DC members and pay lifetime pensions. Those pensions are not guaranteed and may be adjusted each year, up or down.

The draft RCPS regulations build closely on the regime for unconnected multi-employer (UME) CDC schemes, which came into force in July 2026. Key points are outlined below.

• Providers: Only authorised master trusts and UME CDC schemes will be able to offer an RCPS, and they will need to be specifically authorised for the purpose. The £25bn scale requirement will not apply to RCPSs. Viability will be tested through authorisation instead.
• Access: Guided retirement will be the only route into an RCPS, at least initially. Retail access will not be permitted, and DB members will not be able to transfer in. However, partial transfers will be allowed, and a member who joins via guided retirement might add further pots later. It will not be possible to move members to an RCPS via a bulk transfer without consent.
• Pricing and quotations: Where a member's pot is transferred to an RCPS, benefits will have to be credited on an actuarially equivalent basis. Potential transferees will receive quotations when a default is presented. Rather than signing off each quotation, the scheme actuary will approve a quotation template.
• Cohorting: Schemes will be permitted to group members into cohorts by joining date, so that target pension increases differ between cohorts. This will have to be governed by the scheme rules, and must not undermine the scheme's design.
• Inflation: The 2025 consultation proposed that each new cohort should target pension increases of at least CPI. That proposal does not appear in the draft regulations. The DWP asks whether a more flexible approach would be appropriate.
• Charge cap: Charges will be capped at 0.75% per year of the collective fund. Alternatively, an RCPS may opt for a flat fee and a percentage charge, with caps for each (eg £25 per member and 0.4% of the collective fund per year).
• Flexibility: The Government is minded to allow members up to a year (from pension start date) to switch to flexi-access drawdown, where scheme rules permit. Proposals for the necessary tax changes were announced in the Autumn Budget.

The consultation closes on 15 December 2026. The Government envisages that the regulations will come into force in the second half of 2028, with the first RCPSs authorised by mid-2029.

Comment

The proposed guided retirement regime asks a lot of trustees and providers. Designing defaults, segmenting the membership, managing communications and consent: these will be substantial undertakings. It is no surprise to find the DWP reporting that the "vast majority" of own-trust schemes are likely to take the transfer route. For relevant trustees, the key decision becomes the choice of receiving scheme, and the consultation makes clear that it will need to be carefully evidenced.

 The legal framework for RCPSs is taking shape, but commercial challenges and uncertainties remain. Potential providers will have to assess whether they can accommodate the attendant complexities within a 0.75% charge cap. They will also need to consider whether they can achieve the necessary critical mass, bearing in mind (among other things) that access will be via guided retirement only.