Outlook 2026: Making collective DC a reality

The Pensions Regulator (TPR) will begin accepting authorisation applications later this year, and with TPT Retirement Solutions announcing its intention to launch a CDC arrangement, it seems that the concept is tantalisingly close to becoming a reality.

Pensions Expert asked CDC experts for their views on what 2026 holds for the nascent CDC sector, what challenges are still to be met, and how proponents should go about communicating this new model to savers.

Click on the questions to jump ahead to responses.

• Will 2026 be ‘the year of CDC’?
• What is the biggest challenge for CDC proponents?
• What is the biggest opportunity for CDC this year?
• How do providers effectively communicate with savers about CDC?

Will 2026 be ‘the year of CDC’?

Mark Stopard, head of proposition development at Zedra: “My take is that CDC will be a case of the irresistible force meeting an immovable object. There is so much that needs to be done to get unconnected multi-employer CDC schemes up and running, and so much latent inertia in the system. Schemes can apply for authorisation from August, but the process takes up to six months. The dam will burst, but after 2026, despite the interest and potential for member benefit.”

Maggie Rodger, co-chair of the Association of Member Nominated Trustees (AMNT): “With authorisation not likely to open for some months, it could be the year of CDC preparation. A lot of information will be sent to potential members about how CDC works, but it is more likely that new multi-employer schemes will be ready in 2027 than in 2026.”

Paul Waters, head of defined contribution (DC) markets at Hymans Robertson: “We will see more schemes announce their plans to come to market in 2026, but 2027 will be the real year of CDC growth as employers join and employees start building up CDC benefits.”

Chintan Gandhi, partner and head of CDC at Aon: “While 2026 should see a lot more work and activity from prospective whole-life multi-employer CDC schemes, no scheme will be able to accept contributions until 2027 at the earliest…

“We anticipate 2026 being the year where more whole-life multi-employer CDC providers announce their intention to launch a scheme, with some master trusts also announcing their intention to develop a retirement-only CDC solution to help trustees of DC schemes fulfil the forthcoming duties being placed on them under the Pension Schemes Bill’s guided retirement provisions.”

Matthew Arends, partner and head of UK retirement policy at Aon: “One of my big hopes for 2026 is that the Pensions Regulator’s guidance is finalised alongside the laying of regulations for multi-employer CDC schemes. Once these have taken place, the first schemes will be able to seek authorisation under the new regime from midway through 2026. This will usher in a new era of commercial CDC offerings, with the potential to provide a third way of saving for and spending in retirement.”

What’s the biggest challenge facing those working on CDC this year?

Chintan Gandhi (Aon): “For any prospective provider, the uncertainty over TPR’s regime for authorisation and supervision remains a key unknown, as without this no prospective provider can determine whether CDC is a solution that can be offered in a commercially viable way.

“By extension, it makes it difficult for many of those employers who are interested in whole-life multi-employer CDC as a credible alternative to their existing provision to come out and engage in formal discussions or even partnerships with providers to help these solutions get off the ground.”

“[The challenge is] getting the balance right between ensuring things can’t go wrong and developing at pace to give prospective members access to the potential that’s there.”

Mark Stopard, Zedra

Paul Waters (Hymans Robertson): “Getting high-quality administration systems set up and ready to go.”

Maggie Rodger (AMNT): “There will be a need for clear communication of a new concept to members. They probably don’t know much about how their current schemes work, so this too will need to be communicated in order for them to be able to compare. The only data is from modelling, so there is no real-world experience that can be used to explain.”

Mark Stopard  (Zedra): “It’s the self-driving car challenge: getting the balance right between ensuring things can’t go wrong and developing at pace to give prospective members access to the potential that’s there.”

What’s the biggest opportunity for CDC next year?

Maggie Rodger (AMNT): “Moving the dial from the cheapest schemes for employers towards best outcome for members and the adequacy of their pensions, reflecting the direction of the Pensions Commission and the emphasis on value for money.”

Paul Waters (Hymans Robertson): “A single ‘take all’ provider to be appointed. This is not currently planned, but it would make a major difference to the growth of CDC if it happens.”

Mark Stopard (Zedra): “We are not alone in saying this, but accumulating in DC and taking a retirement CDC is a saving pattern that will suit many more people than multi-employer schemes can accommodate. The Department for Work and Pensions has found a way to do this through guided retirement defaults, but the opportunity is there to condense legislative and regulatory timescales so that selecting a retirement CDC as a default can be a practical possibility for trustees.”

Chintan Gandhi (Aon): “The biggest opportunity for whole-life CDC for 2026 and beyond is to unlock its true potential to deliver greater value to over 20 million UK workers from their existing DC savings. Whole-life CDC sits very neatly in the intersection of the Venn diagram, where employers want to provide pensions at a fixed cost and risk profile, and where employees want an income for life in retirement without having to make complex decisions. Underpinning this is a real opportunity for employers to unlock greater efficiency and a stronger employee value proposition.”

How can organisations looking to support CDC tackle the member communication challenge?

Paul Waters (Hymans Robertson): “Don’t overthink it. CDC is like a DB benefit that can go up or down a bit. We don’t need to communicate to try and make every member a CDC expert.”

Mark Stopard (Zedra): “Keep it simple. Explain the benefits, risks and principles – don’t try to explain it by reference to current arrangements or other forms of pension provision (which the general workforce don’t understand anyway). As with the Royal Mail Collective Pension Plan, do lots of testing.”

Chintan Gandhi (Aon): “There is a real opportunity for the pensions industry to come together to consistently convey and communicate what CDC is to both organisations interested in it, and to members. To me, the message to members ought to be simple: CDC pools together your existing defined contributions to provide you with an income for life that is expected to keep pace with the cost of living, and without requiring you to make complex decisions.

“We think good CDC communications will also make it clear to members that there is a chance their benefits may be cut in future, although our experience of working with well-designed CDC schemes targeting inflationary increases at the outset suggests the chance of cuts is expected to be relatively low.”