On the go: Aon has launched an online quiz that UK employers and pension scheme trustees can use to explore how a collective defined contribution scheme could meet their future needs.
Aon’s CDC-simplified tool asks 10 questions that allow those currently running defined benefit or DC schemes to see if a CDC pension scheme could be an option for them
Based on the answers to each question, respondents can also establish which “flavour” of CDC might be suitable for their circumstances, Aon stated.
As reported by Pensions Expert, the government published a consultation on regulations governing CDC schemes in July, which despite being received as a welcome step forward in the industry, caution was raised that initial demand was likely to be low due to the restrictive conditions and high costs imposed on the market.
The Pension Schemes Act 2021 provided the legislative framework required to establish and operate CDC schemes, reviving a concept first suggested in 2015. These are a type of money purchase provision, new to the UK but already established in other countries, which can be established under trust by a single employer or a group of connected employers.
In a CDC scheme, contribution rates for employers and employees are set in advance, and members pool investment and longevity risk. CDC schemes provide income in retirement, though the rate of increase varies and pension reductions are possible in certain circumstances.
Chintan Gandhi, partner and head of CDC at Aon, said: “Now that CDC schemes are a real option, we are seeing an increasing number of industries, organisations and pension schemes looking to gain a greater understanding of this innovative approach.
“They want to see whether it might be suitable for them and, if so, in which form.”
He added: “There is a growing awareness that CDC provides pension savers with access to an income for life in retirement, and from fixed-cost DC savings — all without having to make complex financial and investment decisions.
“Our online quiz is a quick and simple way of navigating the CDC options that will emerge. Some flavours of CDC are likely to be more appropriate for different industries, organisations and schemes, whether they currently offer just DB, just DC, or, as with many, a combination of both.”
