The LifeSight master trust plans to launch a retirement-only collective defined contribution (CDC) offering, it announced today, as the pensions industry anticipates a new regulatory framework later this year.
In a statement published this morning, the £30bn pension provider said the new arrangement would sit alongside its existing drawdown facility – which has more than £1bn in assets – “as soon as the UK regulatory framework allows”.
A CDC arrangement through retirement aims to improve saver outcomes by pooling investment and longevity risk, with income levels adjusted over time based on the collective experience of saver cohorts.
The government is expected to publish draft regulations for retirement-focused CDC plans later this year, with the authorisation regime scheduled to open in 2028.
Pensions minister Torsten Bell said: “Retirement CDC offers hardworking people who have spent decades saving in a DC scheme a different option for their retirement. One where risks are shared, returns are more predictable, and the focus is on securing a reliable income for life.
“Alongside our wider pension reforms, which will drive costs down and lift workers’ retirement saving returns up, retirement CDC is a significant step towards helping millions of people get the security they deserve in later life.”
Jelena Croad, head of LifeSight UK, said her organisation felt CDC would be “the best option” for traditional defined contribution (DC) savers when they reach retirement, offering “the highest sustainable lifetime income… without putting the burden of managing pensions decisions onto the member”.
Croad added that retirement-only CDC would “play an important role for those members who don’t want to make active decisions with their retirement savings in later life”, as well as forming “a key part of guided retirement”.
Last year, TPT Retirement Solutions announced its plan to launch a whole-of-life CDC scheme, but LifeSight is the first to announce a retirement-only plan.
Consultancy giant WTW, LifeSight’s parent company, is a supporter of the CDC concept and was one of the advisers to Royal Mail during the design of its CDC arrangement.
New research from the company, published last week, reported that retirement-only CDC could produce incomes around 25% higher than traditional annuities, with a lower risk profile.
While there would be variations, WTW said retirement CDC was likely to be the best default pension income option for the majority of DC savers.
Rash Bhabra, head of UK retirement at WTW, said: “We are pleased the government continues to be supportive of CDC, and sees this as an area where pension schemes can support the UK’s economic growth and bring benefits to UK workers. We look forward to continuing to work with the government to bring to life the vision of CDC pensions for DC savers.”
