Guided retirement will require workplace pension providers to offer members a default pension: a ready-made way to turn their defined contribution (DC) savings into an income, without having to make complex choices at retirement. On 3 November 2026 the FCA, the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) published their first joint proposals. The FCA published them as discussion paper DP26/2 for contract-based schemes. Responses close on 22 December 2026, draft FCA rules follow in the second half of 2027, and the first providers would have to comply by about summer 2029.
Why guided retirement is coming
Automatic enrolment has brought millions of people into DC pensions, but it has also shifted investment and longevity risk onto individuals. At retirement, members face decisions about drawdown, annuities and cash that many are not equipped to make. The FCA's data in the consultation show that more than one million DC pots were accessed for the first time in 2025 to 2026, and nearly half of those were taken as full cash.
Access is also uneven. The consultation notes that around two-fifths of DC occupational pension schemes offer no decumulation products at all, so many members must leave their scheme, or cash out, to turn savings into an income. Guided retirement is designed to close that gap inside the scheme the member already has.
The Pension Schemes Act 2026 places duties on trustees to provide well-designed default pensions. The FCA must make rules for contract-based providers that achieve the same outcomes as far as possible. DP26/2 is the first step in that work.
Who is in scope
| Group | Proposed position |
|---|---|
| Contract-based workplace schemes used for automatic enrolment | In scope |
| Workplace personal pensions not used for automatic enrolment | In scope, including group personal pensions, group stakeholder pensions and group SIPPs |
| Occupational schemes with members who are mainly DC savers | In scope (DWP regulations) |
| Active, deferred, pension credit and pensioner members with flexible benefits | Eligible for a default pension |
| Members with hybrid benefits including a defined benefit or collective element | Proposed exclusion |
| Deferred members with pots of £1,000 or less eligible for small pot consolidation | Proposed exclusion |
| Very large pots | No exclusion proposed; views sought on an upper limit |
Pensioners already in drawdown are included because they may still need to make decisions about their remaining savings.
What a default pension must do
The proposals set design requirements every default must meet and design considerations providers must weigh.
| Design requirements | Design considerations |
|---|---|
| Protection against longevity risk on pots above £10,000 | Protection against inflation risk |
| A single point of consent | Flexibility |
| Cooling-off periods | Protections where a default has irreversible elements |
| Parameters designed in advance | Valuable benefits such as guaranteed annuity rates |
| Spousal or dependant protection | |
| Retirement collective pensions |
Longevity protection is the core of the design. Providers cannot set an end age at which protection stops, and the government's view is that a default cannot require a member to buy their own annuity, including through an annuity broker. Providers would manage drawdown withdrawal rates where drawdown is used.
The £10,000 threshold
The government proposes that longevity protection applies to pots above £10,000, net of any tax-free cash, measured across all relevant DC pots a member holds with the same provider. Some providers suggested £30,000. The consultation estimates a £30,000 threshold would exclude around 290,000 more pots. FCA data show that 82% of pots under £10,000 accessed for the first time were fully cashed, compared with 49% between £10,000 and £30,000 and 11% above £30,000.
For pots below the threshold, providers would still be expected to offer support so members do not face complex decisions alone.
How targeted support fits in
The FCA intends to build the conduct rules for contract-based providers on the targeted support framework in COBS 9B, adapting it where needed. Targeted support lets firms suggest products or actions to groups of consumers with common characteristics without giving personal advice. Guided retirement goes further: defaults are mandatory, must be available to every eligible member and must include longevity protection, so the rules will differ in important ways.
The FCA will also need to consider how guided retirement interacts with the regulated activities that require authorisation. Providers and platforms should map which parts of the member journey, from communications to switching members into a default, could be a regulated activity, and who in their distribution chain carries it out.
Transfers to other schemes
Not every provider will build its own default. The proposals let pension providers meet the requirement by transferring members, at the point of access, to another scheme that offers a qualifying default pension. FCA rules would provide for transfers out of contract-based schemes, with the same core standards whether the default is in-house or through a transfer.
A receiving scheme must be authorised: a TPR-authorised occupational scheme or a personal pension operated by an FCA-authorised firm. A transfer can happen where providing a default in-house is not reasonably practicable, or where members are likely to get better outcomes elsewhere. The better outcomes test does not require a market-wide search, only a comparison between the receiving scheme's default and what the provider could offer itself. Group personal pension providers and master trusts are likely to be the main receiving schemes, which is one reason they face the earliest deadline.
Product governance and permissions
Designing a default is product governance in FCA terms. Providers would identify cohorts of members with shared needs and characteristics, design defaults to match them and look beyond in-house options when assessing what the market offers. They would need to evidence that their assumptions, for example on life expectancy, are reasonable and that their data sources are sound, and to monitor whether expected benefits from scale or risk sharing reach members.
Permissions also need checking. The paper notes that arranging deals in investments and managing investments may be relevant, and that a provider that itself promises an income for life may be effecting and carrying out contracts of insurance, which needs Prudential Regulation Authority and FCA permissions. Providers without those permissions would need to deliver longevity protection through a partner. Our compliance audit service can test permissions and governance against the proposals.
Communications across the member journey
The paper sets out communications from joining to decumulation. For contract-based schemes, information about guided retirement would appear in the key features document at joining. Members approaching access would be told which default they have been assigned and what income it is likely to provide. Providers would give impartial guidance on whether to consolidate pots before access, point members to Pension Wise where it would help, and send sustainability warnings where withdrawals look likely to run out early. The FCA expects to use the Consumer Duty to underpin these requirements for contract-based schemes. Our guide to the Consumer Duty for investment and wealth firms covers the outcomes framework this will sit on.
Questions the paper asks
The paper asks for views on detailed design choices. Providers should prioritise the questions that most affect their book:
- whether £10,000 is the right threshold for longevity protection, and whether very large pots should have an upper limit;
- how guaranteed annuity rates should be treated, given the time-limited decisions they involve;
- how individual annuities, including basic non-underwritten annuities, could form part of a default without adding complexity;
- what new products, such as regular-premium insurance alongside managed drawdown, could provide longevity protection;
- when communications should start, including the use of normal minimum pension age as a trigger for trust-based schemes;
- the practical costs and challenges of the communication journey, transfers and governance.
Evidence matters more than opinion. Data on pot sizes, access patterns and the cost of building and running a default will carry weight with the FCA and DWP.
Proposed timeline
| Provider type | Proposed deadline | Projected date |
|---|---|---|
| Master trusts | 12 months after regulations and the FCA policy statement | Summer 2029 |
| FCA-regulated schemes | 12 months after regulations and the FCA policy statement | Summer 2029 |
| Master trusts offering retirement collective pensions as the default | Pension benefits strategy at 12 months; default pensions at 24 months | Summer 2029 and summer 2030 |
| Common employer group master trusts and single employer trusts | 24 months after regulations | Summer 2030 |
The timeline is indicative and subject to consultation and Parliament. The government also notes that 2029 is the first year that consequences under the value for money framework apply.
What providers should do now
- Respond by 22 December 2026. The paper asks detailed questions on the threshold, scope, transfers and communications, and the answers will shape the draft rules.
- Profile the membership. Pot sizes by provider, access patterns and multiple-pot holdings drive default design.
- Decide build, buy or transfer. Providers can design defaults in-house or arrange transfers to schemes that offer them. Each route needs governance evidence.
- Plan governance. The proposals require documented decisions on design, parameters and value. Independent governance committees are likely to need a clear role.
- Prepare distribution and advice boundaries. Map how communications and default allocation sit against advice, guidance and targeted support.
Regulatory Counsel's investment and wealth practice supports providers and platforms with these steps, alongside our compliance support service.