November 12, 2026
Guided Retirement: Should Your Pension Provider Choose?
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Are you happy to let your pension provider choose how you spend your retirement?
Money Matters
Earlier this month the pensions minister, Torsten Bell, set out how the government wants workplace pensions to pay out in future.1 The headlines promised private sector workers an income for life. I found myself nodding along as I read them, and then frowning.
I was nodding because he’s right that turning a pension pot into an income is hard. I was frowning because of what it means for anyone who doesn’t make a choice.
What has actually changed?
The law has already been passed. The Pension Schemes Act 2026 became law in April.2It says workplace pension schemes must offer a ready-made option – a default – for people coming up to retirement who want to start taking their money. The government calls this “guided retirement”.
What that default will look like is still being worked out. The government opened a consultation on 3 November, and it runs until 22 December. The proposals so far suggest that if your pot is over £10,000 after any tax-free cash, the default would normally include some form of income for life. Your provider would design the rest, including how much flexibility you get.3
None of this starts tomorrow. The larger pension providers are expected to have their defaults in place by summer 2029, and schemes run by a single employer by summer 2030.4
Why is the government doing this?
Since 2015, if you’ve built up your own pension pot, you’ve been free to take the money however you like. That freedom matters. But it has also left people making very big decisions on their own, with no idea how long their money needs to last. Some spend too quickly and end up relying on the state pension. Others are so cautious they take far less than they could.5
So a sensible fallback for people who would otherwise drift is a good thing. I’ve no quarrel with that.
So what’s the catch?
What’s important about that is the word “default”. A default is what happens when you don’t decide.
We don’t yet know what the defaults will look like. Some providers may offer a steady income for life. Others may build in more freedom. One large insurer already offers what it calls “flex first, fix later”, with more flexibility in the early years and a secure income later on.6 But whatever each provider designs, it will be built for the typical member of that scheme. It won’t be built for you.
In 30-odd years of doing this, I’ve found retirement rarely runs in a straight line. It looks more like a smile. People tend to spend more in the early years, when they’re fit and want to travel, help the children or finally sort out the garden. They usually spend less in their mid to late seventies. Then they may need to spend more again later on, if care becomes part of the picture.
Live the money, enjoy the money. That’s what those first years are for.
What would that look like in practice?
Say I was sitting down with someone in her late fifties who planned to stop work in a few years’ time, after the new rules are in place. Her state pension wouldn’t start until 67. She’d want to spend more in her first few years, on a couple of big trips and some help for her son with a house deposit. She’d be happy to live more modestly later.
If she didn’t make a choice, she’d be put into her provider’s default. Depending on how the provider designs it, she could find part of her pot turned into a lifetime income. That would give her security, which matters. But some lifetime incomes, such as annuities, can’t be undone once they start, and it isn’t yet clear how easy it will be to leave the new collective schemes. And even a more flexible default wouldn’t know about her trips or her son’s deposit.
If she chose for herself, we might keep more of her pension invested and have her draw a higher income in the early years, to carry her through to her state pension. Later, once she’d had her travelling years, she might use part of what’s left to buy an annuity. That’s an insurance product that pays you a set income for the rest of your life, so her essential bills would be covered.
That plan has its own risks, and I’d make sure she understood them. Investments can fall in value as well as rise. If she spent too much too soon, she’d have less to fall back on later. That’s why we’d keep a cash buffer and go through the plan with her every year.
That’s the key. Neither route is wrong. But only one of them is built around her.
Why does choosing matter more now?
At the moment, if you don’t make a decision, nothing happens. Your pension stays invested until you act. Under the new rules, not deciding becomes a decision in itself. Your provider’s choice becomes yours.
You’ll still be able to opt out. But it’s far easier to choose the right thing at the start than to untangle the wrong one later. So a reform meant to make retirement simpler could leave you with less choice than you have today, if you leave it to someone else.
Why plan now, when the changes are years away?
These changes are still a few years away, but the decisions that shape your retirement are made long before you take your first payment. When will you stop work? How will you cover the years before your state pension starts? How much of your spending is for the essentials, and how much is for enjoying yourself while you can? Which pots will you draw from first?
Get those answers in place early and you’re the one in charge. You know what you’re aiming for, and you have time to change course if life changes – to save a bit more, stop a bit sooner, or slow down rather than stop altogether. Leave it until the month you retire and you’re working with whatever’s left on the table.
When we plan with someone, we start with how they want to live, then work out how to pay for it. We do the sums and the paperwork. All they need to bring is a picture of the retirement they want.
Guided retirement will give people a safety net, and that’s welcome. But a safety net is for when you fall. It isn’t a plan for how you want to live.
Daren Wallbank, Chartered Financial Planner and Lead Adviser, Ginkgo Financial
2Pension Schemes Act 2026, Royal Assent 29 April 2026.
4Pensions Barrister, Consultation on guided retirement launched, 3 November 2026.
6IFA Magazine, Experts react as government consults on default retirement income, 4 November 2026.
Approved by Quilter Financial Services Ltd.
