An analysis for corporate advisers of the guided retirement proposals requiring workplace schemes to offer members a ready-made retirement income, which schemes they reach, and where advisers fit in before the consultation closes on 21 December.

In reading this article you will understand:

  • What a default pension is under the guided retirement proposals, including the longevity protection, single consent and cooling-off requirements.
  • Which workplace schemes and members are proposed to be in scope, and the indicative compliance dates for master trusts, FCA-regulated schemes and single employer trusts.
  • How the proposals affect advice to employer clients and to individual members, including the FCA’s question on default pensions and suitability.

Workplace pension schemes will have to give members a ready-made way to turn their savings into a retirement income, and the detail is now out for consultation. On 3 November 2026 the Department for Work and Pensions (DWP), the FCA and The Pensions Regulator (tPR) published a joint guided retirement policy consultation, developed with HM Treasury. It sets out how trust-based and contract-based schemes should deliver the default pension duty in the Pension Schemes Act 2026, which received Royal Assent on 29 April 2026. The consultation closes at 11:59pm on 21 December 2026, so advisers to employers have a narrow window to understand what schemes will be asked to build, and to have a say in it. Our October Insight, Guided Retirement: What Corporate Advisers Should Ask Scheme Providers Now, covered the duty in the Act; this piece covers what the consultation now proposes.

What a Default Pension Is

The DWP defines a default pension as a method of taking pension benefits that is presented as a pre-selected option when an individual contacts their provider to access their defined contribution (DC) pot. The aim, in the department’s words, is to “remove the need for individuals to make complex decisions”. Members keep the freedom to choose something else.

The design rules are demanding. Above a threshold, a default pension must protect against longevity risk for life: providers cannot set an upper life expectancy or target date at which the protection stops, or require the member to buy their own annuity, including through a broker. On drawdown the consultation is blunt: “a drawdown strategy alone cannot deliver this”. It describes managed drawdown combined with an annuity (flex then fix or flex and fix), bulk annuities for trust-based schemes, and Retirement Collective Pension Schemes (RCPS), on which a separate consultation closes on 15 December 2026.

The proposed threshold is £10,000, net of any pension commencement lump sum and applied across all of a member’s DC pots with the same provider. Some providers have argued for £30,000; the DWP estimates that a £30,000 threshold could exclude around 290,000 more pots held by people aged 60 to 65 from longevity protection. The payment request would be the single point of consent, with a proposed minimum 30-day cooling-off period. Members who will not or cannot answer allocation questions must still be allocated a default, using only factual data such as age and pot size, although nothing is paid until the member asks.

Which Schemes Are in Scope

The proposals reach most of the workplace market. Occupational schemes whose members are primarily DC savers are in scope, as are contract-based workplace schemes: group personal pensions, group stakeholder pensions and group self-invested personal pensions (SIPPs) that operate as workplace schemes, whether or not they are used for auto-enrolment. Active, deferred and pension credit members, and pensioner members with flexible benefits, would be eligible, provided they are not already in a default pension.

The proposed exclusions are narrow: defined benefit (DB) schemes whose only DC element is an additional voluntary contributions section, small self-administered schemes, executive pension schemes, collective (CDC) and cash balance schemes, and “accidental” workplace SIPPs, where two or more employees have independently set up SIPPs with the same arrangement. Members whose hybrid benefits include a DB or collective element, and deferred pots of £1,000 or less that meet the small pots consolidation rules, would also be out of scope. Individual SIPPs are not covered, although the DWP asks whether they should be.

Governance, Timelines and Enforcement

Under the Act, trustees must publish a Pension Benefits Strategy setting out how they will understand members’ needs, design or identify defaults that reflect them, and communicate them; the DWP proposes adding a summary for members. It also proposes a review at least every six years, and sooner on specified triggers, including a significant change in membership, a change in employer participation, or a merger or acquisition. For contract-based schemes, the FCA proposes to rely on its existing product governance rules and the Consumer Duty instead.

Under the indicative timetable, which remains subject to consultation and Parliament, master trusts and FCA-regulated schemes would comply 12 months after regulations are made, estimated as summer 2029, and single employer trusts and common-employer group master trusts 24 months after, estimated as summer 2030. Industry feedback suggests most single employer trusts will meet the duty by transferring members to a master trust at the point of access, and the DWP proposes that members should not bear administration charges for that transfer. tPR would be able to issue compliance and penalty notices to trust-based schemes, with maximum penalties of £10,000 for an individual and £100,000 in other cases. The consultation also asks whether charge caps should apply to default pensions other than RCPS, and confirms an intention to extend the Value for Money framework to decumulation.

What It Means for Advisers

For employer clients, the impact depends on how they provide their pension. Where a client sponsors a single employer trust, its trustees face a real choice between building a default in-house and transferring members to a master trust, and choosing the receiving scheme will itself be a governance decision that needs evidence behind it. Where a client uses a master trust or group personal pension, the duty sits with the provider, but the quality of each provider’s default pension is likely to become a meaningful factor in scheme reviews and selection exercises. Clients planning acquisitions or changes to participating employers should know these are proposed review triggers.

Members will notice too. Trust-based schemes would have to send retirement-focused communications from five years before a member’s normal minimum pension age, and every five years after that, in addition to the existing wake-up communication four months before access. Employers should expect questions from staff to reach HR and benefits teams, which makes this a natural topic for financial wellness programmes.

For individual retirement advice, advised members could still use default pensions, and providers could give advisers information about the default rather than running the allocation process. The FCA is considering whether advice on retirement income or decumulation should consider the default available to the individual as part of the suitability assessment, and Question 1 asks whether this should be an expectation or a requirement. If adopted, the scheme’s default could in effect become a reference point that any recommendation is weighed against.

These are policy proposals, not final rules; draft regulations and FCA rules will follow in a further consultation. The direction is clear, however, and advisers who want to influence how defaults are built, or how they will feature in suitability, have until 21 December to respond.

Things to reflect on for CPD

  • Which of your employer clients sponsor single employer trusts, and how would you support their trustees in deciding whether to build a default pension in-house or transfer members to a master trust?
  • How would you factor the quality of a provider’s proposed default pension into your next scheme review or provider selection exercise?
  • How would your suitability process change if the FCA expected, or required, retirement income advice to consider the client’s scheme default pension?
  • Should you or your firm respond to the consultation by 21 December 2026, and on which questions?