Government finalises regulations on CDC pensions | Article

The government has finalised regulations around multi-employer collective defined contribution (CDC) pension schemes and launched a consultation on retirement CDC.

The regulations, which will be laid before Parliament on 23 October, will allow the expansion of CDC schemes to more employers and address a growing demand from employees to receive a more secure retirement income.

CDC schemes pool pension schemes into a collective fund giving workers regular pension payments for life, more security and higher average retirement incomes throughout retirement.

Ahead of the regulations being laid, Torsten Bell, minister for pensions, will deliver a speech to hundreds of key employers setting out the benefits of CDC schemes and the next steps in implementing these.

This builds on the success of the UK’s first CDC scheme, the Royal Mail Collective Pension Plan, which has more than 100,000 members.

The government’s consultation, meanwhile, focuses on retirement CDC, which would allow individuals who have saved in to a DC scheme to transfer their pension pot to a CDC arrangement at retirement. The proposal aims to see more people receive an income for life that aims to keep up with rising prices without having to worry about managing their retirement money themselves or calculating how long their retirement savings need to last.

Bell said: “Too often, people approaching retirement are left navigating complex choices and shoulder risks they shouldn’t have to face alone.

“Collective pensions offer savers a new option that, in many cases, will be a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.

“By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last and they can enjoy their retirement.”

Zoe Alexander, executive director of policy and advocacy at Pensions UK, added: ”Multi-employer CDC schemes have the potential to boost retirement savings by sharing risks between savers. Success depends on striking the right balance between strong protections for members, simplicity and fairness of scheme design. We agree with government that innovation in CDC carries huge promise for savers and are pleased that this government is supporting the development of both multi-employer and at-retirement CDCs.”

Pretty Sagoo, managing director of defined benefit solutions at Just Group, said: “At a time when pensions policy is enjoying long-overdue attention, the government’s exploration of ways to further improve retirement income is welcome. Most DC savers expect their pension to provide the income needed to help them achieve financial security in retirement. Retirement CDC could be a valuable answer to that challenge for some schemes and scheme members, in addition to other solutions that are already available or are coming to this market.”