The government plans to legislate to make it easier to consolidate the post-retirement sections of defined contribution and collective defined contribution (CDC) pension schemes.
This week’s Budget report announced that changes would be brought forward in the Finance Bill 2027-28 to allow scheme members to retain protections when transferring from a retirement CDC scheme to a drawdown arrangement. This would make it easier to consolidate into a traditional DC scheme’s post-retirement structure.
The Budget report stated that the changes would be made to rules around guided retirement and retirement-only CDC plans.
“This will include expanding the circumstances when a member may keep certain protections following a transfer and allowing members to transfer from a retirement CDC pension to a drawdown arrangement within a set timeframe,” the report said.
Maurice Titley, commercial director of data and dashboards at technology company Lumera, said the move provided further support for consolidation of pension schemes.
He added: “Retirement CDC has the potential to offer savers a more sustainable retirement income, while the ability to transfer between arrangements and retain existing protections will be important in providing flexibility and building confidence.
“These developments reinforce the urgent need for DC schemes and providers to accelerate investment in data quality and technology to support this direction of travel. Greater consolidation, more flexible retirement options and increasingly personalised guidance will all require more sophisticated systems and better use of member data.”
Renny Biggins, head of policy for long-term products and savings at The Investing and Saving Alliance, added that the move was “crucial to the success of guided retirement and the government’s wider pensions ambitions”.
“Equally, retirement is not one-size-fits-all, so allowing members of retirement CDC arrangements to move into drawdown within a defined timeframe preserves important flexibility,” Biggins added. “Modernising outdated pension protection rules on transfers should also remove unnecessary obstacles.”
Ray Hughes, director at consultancy group Hughes Price Walker, said the change could “broaden the options available to people approaching and taking retirement”.
