The government has published its response to an earlier policy consultation on these collective schemes, along with draft regulations that would allow providers to offer them as a default pension option.
Richard Knox, executive director of strategy, policy and analysis at the Pensions Regulator, said: “People need more help to turn a pension pot into a sustainable retirement income, and well-designed default options at retirement will help people navigate these complex and important financial decisions.”
Multi-employer whole-of-life collective schemes are also expected to launch next year.
Industry figures have broadly welcomed the proposals. Lauren Branney, head of CDC at Hymans Robertson, described the announcement as “a major moment for workplace DC pension savers.”
Ms Branney said collective schemes could deliver higher retirement incomes, which would particularly benefit those facing inadequate provision under current arrangements. She added that empowering trustees and providers to offer income as a default “removes the difficult decision-making burden from savers.”
Kirsty Ross, product and proposition director for People’s Pension, said the reforms recognised a fundamental truth about human behaviour.