17 Million Workers to Be Offered Guaranteed Pension Income for Life

Seventeen million private sector workers will be offered a guaranteed pension income for life under new government rules outlined on Tuesday, in what ministers call the resurrection of proper pensions outside the public sector.

The proposals create a default option for retirees, designed to ensure their savings convert into an income that lasts throughout retirement. Payments under the simple option will often be linked to inflation. Retirees keep full flexibility: they can still withdraw their money in full or invest it elsewhere, but the default gives them a straightforward path they can simply accept.

The move reverses, in effect, a 30-year drift. Most final salary schemes offering a set payout for life have closed over that period. Workers instead accumulated a pot of money and faced the burden of deciding what to do with it at retirement. George Osborne then scrapped the obligation to buy an annuity — the product that converts a pot into income for life — leaving many savers unsure how to manage their money.

Why is the government stepping in now?

The government says nearly half the pension pots accessed for the first time in 2025-26 were emptied out entirely. That leaves people at risk of outliving their savings and reliant on their state pension.

Pensions minister Torsten Bell said: "Private sector workers deserve a much better deal when it comes to pensions. They are doing the right thing and saving for retirement, but when they get there too many are left without a genuine pension."

He added: "We are resurrecting proper pensions for private sector workers, guaranteeing them the option of an income that lasts throughout retirement and in many cases protection against the rising cost of living – things public sector workers take for granted."

How did so many workers end up saving?

Savings have been boosted by the auto-enrolment system introduced in October 2012, which requires employers to put every worker aged 22 and over into a pension scheme and make a company contribution. Workers can opt out, but nine in 10 eligible private sector workers now contribute to a retirement fund, up from four in 10 in 2012.

The savings side works. The decumulation side — turning a pot into lasting income — is where the government says savers have failed. The new default regime targets exactly that gap.

What do industry experts say?

Pensions experts backed the move but warned against restricting choice. Yvonne Braun, director of long-term savings policy at the Association of British Insurers, said the proposed scheme had the potential to simplify decisions about accessing pensions, but stressed it was important "that people continue to have the freedom to make their own decisions".

The market backdrop complicates any assumption that annuities had faded. Although they are no longer a compulsory part of retirement planning, sales have been buoyant thanks to rising returns for investors, and changes to inheritance tax rules that have encouraged wealthy people to move money out of their pensions.

The government now faces the design task of building a default that protects the half of retirees who currently empty their pots at first access, without dismantling the freedoms Osborne introduced.