A targeted guarantee of decumulation pooling for older defined contribution savers who have run out of time

CHRISTOS A. CHRISTOU

PMI Qualified Professional Trustee, Member of Academy of Experts, Freeman of City of London

June 2026

Submitted to the Pensions Commission call for views

Retirement Pooling for the Cohort That Cannot Wait

Executive summary

The UK pensions debate is rightly focused on improving future outcomes, through higher contributions, consolidation, value for money reform, private markets and better retirement pathways. Almost all of it takes years to make a difference. This note is about a group that does not have years to wait. They are the savers in their late fifties and early sixties with modest defined contribution pots, little or no defined benefit pension behind them, and too few working years left to save their way out. For them the question is no longer how to build a better pension. It is how to convert a modest pot into the highest sustainable income it can yield.

The proposal outlined herein is deliberately narrow. The Commission should consider guaranteeing this cohort access to longevity pooling at retirement, a guarantee owed to the member rather than to any particular institution. Large schemes would be required to offer or arrange it. Members of schemes too small to pool would reach it through a backstop vehicle chosen by open tender, with mastertrusts, insurers and a public consolidator all free to compete. Pooling does not make a small pot adequate. A modest pot remains a modest pot. It improves the conversion of that pot into a wage for life, which for a cohort that has run out of other options is not a small thing.

This is not a solution in search of a problem. The Pensions Commission’s interim report of May 2026 has itself identified both halves of the case, that the way savers use their pots at retirement is failing, and that decumulation needs strong, well-designed defaults (Pensions Commission interim report, May 2026). This note offers one such default, designed for the people who have the least time to wait.

1. The cohort, and why this is triage

Most of the pensions debate is about the future. Dashboards, value for money, private markets, megafunds and contribution rates all matter, and all are about making the system work better for people who still have working years ahead of them. This note is about a group for whom those remedies will be arriving too late. They are the savers in their late fifties and early sixties whose defined contribution pots are already too small to fund an adequate retirement, who have too few years left to save their way out, and for whom no amount of better fund design will change the arithmetic in a material way. For them the question is no longer how to build a better pension. It is how to make the most of what little they have, and how to keep them out of poverty in old age.

The scale is not marginal. Around 1.7 million people aged 55 to 64 are reliant on defined contribution savings with little or no defined benefit pension to cushion them. Across the market as a whole, close to 960,000 pension pots are accessed for the first time each year, and around £71 billion is withdrawn. Of those, only about 9 in 100 secure any protection against outliving their money, and roughly 7 in 10 take the decision with no regulated advice at all. The most common withdrawal rate, for every pot up to a quarter of a million pounds, is 8 percent a year or more, a rate that can empty a £100,000 pot in as little as 12 years. The smallest pots are simply cashed. Can a market that produces these outcomes be said to be delivering retirement income to this cohort? What is not in question is that they are left to manage, alone and unadvised, the single hardest financial problem most of them will ever face, how to turn a finite pot into an income that lasts an unknown length of life.

The Commission has now recognised the undersaving problem across all cohorts in its own evidence. Its interim report of May 2026 puts the number of people undersaving for retirement at around 15 million, rising towards 19 million without action (Pensions Commission interim report, May 2026). Within that wider population, this note isolates the group for whom time itself has run out. The same report found that around 3 in 10 private pension pots are accessed at the earliest possible opportunity, that half of all pots are taken out in full, and that nearly half of those full withdrawals are spent on one-off costs such as a car, a holiday or home improvements rather than turned into income (Pensions Commission interim report, May 2026). It also identified early and often unplanned exits from work in the fifties and early sixties as a major risk to retirement adequacy (Pensions Commission interim report, May 2026). The Commission has already recognised the cohort that is the focus of this paper within the wider group of undersaving workers.

2. The mechanism already exists. It is just not aimed at the cohort that needs it most.

The remedy for this problem is well understood, and the government is already building most of the parts. A collective approach to drawing down savings, in which retirees pool their pots and share longevity risk between them, can lift the sustainable income from a given pot well above what an individual drawing down alone can safely take, because no one has to self-insure against living to 100. This is the logic of collective defined contribution applied to the decumulation phase. The Department for Work and Pensions has consulted on exactly such Retirement CDC schemes. The Pension Schemes Act has created a duty on schemes to offer a default decumulation solution. Small-pots consolidation will, in time, gather scattered fragments into single pots. A value-for-money and consolidation regime is pushing sub-scale schemes to merge. And the Pension Protection Fund has shown, in the defined benefit world, that a public body can act as a consolidator for those a commercial market will not serve.

The gain from pooling is real, and bounded. Because no member in a pool has to hold back against the chance of living to extreme age, the sustainable income from a given pot can be materially higher than a cautious individual would dare to draw alone, and steadier than leaving the member to manage the risk unaided. Published modelling of collective decumulation points to a meaningful uplift over individual drawdown, though the exact figure depends on assumptions the Commission’s actuaries would need to test. What pooling cannot do is make a modest pot adequate. It can only improve the conversion of a finite pot into income, which for this cohort is the one lever still available.

Every piece needed for a policy intervention that can help mitigate inadequate savings of this cohort in decumulation is therefore either in place or in flight. What is missing is not a mechanism. It is the decision to point that mechanism, now and deliberately, at the cohort that has run out of time. The current debate treats Retirement CDC as a product that may mature over this parliament, offered at leisure to schemes that choose to build it. That timetable is fine for a 40-year-old. It fails a 60-year-old completely. The gap this note addresses is one of urgency and of guarantee. Nothing in the current programme ensures that a person retiring in the next few years with a modest pot can actually reach a pooled income, rather than being left to cash out or to draw down alone.

The Commission has gone further than identifying the undersaving issue and the cohort nearing retirement. Among the headline conclusions of its interim report is that decumulation needs strong, well-designed defaults (Pensions Commission interim report, May 2026). The legal duty already exists. The Pension Schemes Act requires every scheme offering defined contribution benefits to provide a default decumulation solution, and the Commission’s call is that those defaults be well-designed. That is the need this note answers. What follows is one concrete design for what that default should be for the people who cannot wait. It matters too that the most obvious alternative, higher contributions, is closed to them. The government has confirmed that automatic enrolment contributions will not rise this Parliament (DWP, May 2026), and higher future contributions could not help a person with only a few working years left in any case. For this cohort the one remaining lever is to convert the pot they already have more efficiently into income.

3. The proposal. Guarantee the member, not the plumbing

The proposal is a single guarantee, that every member of this cohort has access to longevity pooling at retirement, delivered through whichever route fits the scheme they are already in. It has three parts, and the design principle throughout is that no one is forced to surrender assets that their existing scheme can serve well, while pooling is made available to everyone regardless of where they happen to have saved. Pooling here means longevity pooling in the broad sense. Retirement CDC is its leading form, but an insurer-led pooled income product or a consolidator pool would meet the same need, and this note is deliberately neutral between them.

First, mandate the obligation, not the provider. Workplace schemes above a threshold size should be required to offer a pooled, longevity-sharing retirement income option as one of their decumulation defaults, either by building it themselves or by arranging access to a pool run by someone else. The member keeps their pot where it is. The assets do not leave the incumbent. Competition is preserved. The duty falls on the scheme, but so does the income from serving it, which turns the industry from a blocker into a builder, and it gives concrete content to the decumulation default the law already requires.

Second, provide a backstop for those whose own scheme cannot pool. A longevity pool needs scale to be fair and stable, so a small scheme physically cannot run one well. Members of sub-scale schemes should therefore be routed to a vehicle that does have the numbers, whether a designated consolidator, a public option, or simply a larger scheme willing to take them. This is not the mass migration of a whole cohort and its assets. It is a safety net for the minority whose scheme has no realistic path to offering pooling itself.

Third, let the existing feeders do their work. Small-pots consolidation, already legislated, is what assembles a person’s scattered fragments into a pot large enough to be worth pooling. It is the supply line into the poolable range, not a separate problem to be solved here.

The thread joining the three is the guarantee. In a large scheme the member gets pooling in place. In a sub-scale scheme they get it through the backstop. Either way, a member of this cohort is no longer left alone with the very problem that pooling was invented to solve, which is how to convert a pot into a wage that lasts for life.

The same architecture in one view.

4. Who delivers the backstop. An existing player, willing and able

There is a temptation to specify the operator of the backstop pooling vehicle, and to argue about whether a mastertrust, the Pension Protection Fund or an insurer should run it. That argument should be refused. The vehicle, wherever the backstop is needed, should be chosen by open competitive tender, and the tender should be open to all of them. To mastertrusts with the scale to pool. To the Pension Protection Fund, if it wishes to compete and utilise its expertise and skillset. And to insurers and annuity providers, whose longevity and in-payment expertise is precisely the capability this task requires. There is no reason of principle to exclude any of them, and several reasons of practice to include them all.

Deng Xiaoping, defending a pragmatic turn in policy, is said to have remarked that it does not matter whether the cat is black or white, so long as it catches the mouse. The same applies here. When the task is to deliver a wage in retirement that keeps a person out of poverty, it does not matter whether the cat is a mastertrust, a public consolidator or an insurer. It matters only that the job is done, and done well, for a cohort that has no time to wait while the industry settles questions of territory. Opening the field also defuses the strongest objection to the whole idea, that it would force assets out of the schemes that hold them and into the hands of a single favoured competitor. It would not. The incumbent that can serve its members keeps them. The operator of the backstop vehicle that serves the rest is chosen on merit and through competition.

5. The single-employer schemes, and the timing trap

A particular case sharpens the point. There are single-employer defined contribution trusts below the size at which a scheme can sensibly run its own pool, and they are already the subject of a separate consolidation effort intended to merge them into larger arrangements over the coming years. For the younger members of these schemes, that accumulation-phase consolidation is the answer, and this proposal needs no separate provision for them. They will inherit whatever pooling their new and larger home is obliged to offer.

But consolidation is slow, and some of it does not begin until the end of the decade. A 58-year-old today in a £40 million single-employer trust may well retire before the machinery that would have moved them somewhere with scale ever reaches their scheme. For that person the in-scheme mandate is meaningless, because their scheme will never be large enough, and the accumulation consolidation arrives too late to help. They are the clearest possible case for the backstop. This proposal is therefore complementary to the value-for-money and consolidation regime, not a rival to it. That regime is trying to fix these schemes for the long run. This note is about the people who will retire before the fix lands.

6. What is not claimed, and what the Commission would need to test

This note does not claim to have engineered a complete solution. It does not have the granular data needed to stress-test every dimension of this policy proposal, and several questions can only be resolved by the Commission, the regulators and the actuaries who hold the relevant data.

Pooled income is not guaranteed income. A collective arrangement shares investment and longevity experience, which means the income can be adjusted down as well as up, and that must be explained honestly to members, above all to those who can least absorb a cut. The defences are a conservative target, capital buffers of the kind used in collective schemes abroad, and the fact that this income sits on top of the guaranteed floor of the State Pension, which dampens the volatility of the whole. A voluntary pool also faces selection, because those who expect to live long are readier to join than those who do not, which raises the cost of the promise. That is a reason to design entry carefully, through sensible defaults and the option to take the tax-free portion as cash before pooling, not a reason to abandon the idea. There is a genuine tension with the pension freedoms, since pooling mutualises capital that the member can no longer withdraw, which argues for pooling only the income-securing portion of a pot and leaving the rest flexible. And a pool needs a minimum number of lives to be fair, which is the very reason the architecture is tiered, and that threshold is a question for the actuaries rather than for this note.

None of these issues is fatal to pooling as a default option for this cohort. Each is a design question, and naming them is the point. What this note asks is not that the Commission adopt a finished blueprint, but that it put a named population of around 1.7 million people on its agenda, accept that the existing programme will not reach them in time, and commission the work to determine how a guarantee of decumulation pooling could be delivered for them before they retire into avoidable poverty.

7. Recommendation

That the Pensions Commission consider, as a matter of urgency and as targeted mitigation for the cohort approaching retirement with inadequate defined contribution savings, a guarantee of access to longevity-pooled retirement income. Delivered by requiring workplace schemes above a threshold size to offer such an option, directly or by arrangement, and by providing a backstop pooling vehicle for the members of schemes that cannot pool at scale themselves. It is further proposed that the operator of such a backstop vehicle should be selected transparently and competitively from mastertrusts, the Pension Protection Fund and insurers alike. The aim is narrow but the moral case is not. It is to ensure that each member of a cohort of around 1.7 million people aged 55 to 64, who has run out of time, is still able to convert a modest pot into a wage for life, rather than being left to manage poverty alone.

Sources

Population aged 55 to 64, ONS mid-2024.

DC-reliant cohort, Institute for Fiscal Studies, 2024.

Retirement income flows, value withdrawn, advice and withdrawal rates, FCA

Retirement Income Market Data 2024 to 2025.

Total UK DC assets, Investment Association, 2024.

Retirement CDC and the decumulation default duty, DWP and the Pension Schemes Act.

Undersaving population, decumulation behaviour, the finding that decumulation needs well-designed defaults, and labour-market exit in the fifties and early sixties, Pensions Commission interim report, May 2026.

Automatic enrolment contribution policy, DWP, May 2026.

Asset figures for the cohort are an order-of-magnitude estimate dependent on an assumed average pot, and are presented as a range, not a point estimate