The government will introduce long-awaited legislation for collective defined contribution (CDC) pension schemes in the autumn, according to pensions minister Torsten Bell.
Speaking at an industry conference in London this week, Bell confirmed the new regulations, which will allow for multi-employer CDC schemes to be established so that a range of unconnected companies can pool their employees’ pension pots into a collective fund.
The government claimed that pooling investments in this way would mean higher incomes in retirement and help individuals manage uncertainty around how long that retirement may be.
Bell said: “Success in the world of pensions isn’t just about getting people saving, it’s ensuring their savings work as hard as possible for them.
“Making sure more employers and savers have the option of an innovative CDC pension scheme is an important part of making that happen.
“Too often at present, we are leaving individuals to face significant risks about how their individual investments perform and how long their retirements last. Pooling some of those risks will drive higher incomes for pensioners and greater investments in productive assets across the economy.”
Royal Mail currently has the only CDC pension scheme operating in the UK, having launched in October 2024.
Bell also outlined plans to allow ‘decumulation only’ CDC schemes. These would allow existing DC schemes to offer pooled CDC-style retirement options.
Steven Taylor, head of CDC at consultancy groupLCP, said: “It was brilliant to hear the minister’s vision for how new CDC schemes can significantly improve member outcomes, unlock productive investment and come at no extra cost to employers.
“We couldn’t agree more and LCP stochastic analysis presented earlier in the day illustrated how we believe multiemployer CDC can improve retirement incomes by up to 50% compared to traditional annuities. This really could be a case of ‘better for members, better for sponsors and better for society’.”
