LifeSight confirms plans to launch Retirement CDC option

LifeSight is the first master trust provider to confirm it will launch a retirement collective defined contribution (R-CDC) solution as soon as the UK regulatory framework allows.

The £30bn DC master trust, is sponsored by WTW, which helped develop the first CDC for Royal Mail. 

The Government has said that draft R-CDC regulations will be published this year, with the expectation that these schemes will be rolled out in 2027/208, following final regulations and TPR authorisation.

TPT Retirement Solutions has already confirmed it will launch a CDC scheme, while Nest has also said it will look to explore CDCs options. 

LifeSight says a R-CDC solution would be offered to members alongside other retirement options, such as flex and fix. These options would be available to members of LifeSight and to members of any single-employer defined contribution (DC) trusts which partner with LifeSight as a solution for their retiring members. LifeSight is currently in the process of acquiring the master trust Cushon from NatWest.

The UK minister for pensions Torsten Bell welcomed this announcement. R-CDC It is intended to help address the growing challenge of converting DC savings into an income, and it is hoped this might give a higher income in retirement than a traditional annuity, although with less flexibility than income drawdown options.

WTW has published analysis indicating that R-CDC generates a higher lifetime income than other DC retirement options in the vast majority of scenarios.

Jelena Croad, head of LifeSight UK, says: “We believe retirement CDC will be the best option for the majority of DC members reaching retirement who want the highest sustainable lifetime income from their pension pot. 

“R-CDC does this without putting the burden of managing pensions decisions onto the member. This is why we intend to offer R-CDC as soon as legislation allows.

“We are excited to introduce R-CDC in LifeSight, which would be a first in the UK, as part of our range of retirement options. This aligns with our long-standing commitment to innovation, and our ambition to provide members with better retirement outcomes.

“We also believe R-CDC will play an important role for those members who don’t want to make active decisions with their retirement savings in later life. We see R-CDC as a key part of guided retirement.”

Simon Ellis, LifeSight chair of trustees, adds: “Member outcomes are at the heart of all trustee decisions. It is very exciting and satisfying that LifeSight is leading innovation in this area, by offering a range of new solutions to members which are expected to address the significant challenges facing DC retirees.”

“R-CDC will allow members to convert their DC savings into an income for life. In R-CDC schemes, the income levels will be adjusted over time based on collective investment performance and longevity experience, and latest expectations of future experience. Adjustment rates will be calculated by an independent actuary based on valuation assumptions set by trustees, all overseen by an expanded TPR Code of Practice.”

Torsten Bell says: “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.”

WTW head of UK retirement Rash Bhabra adds: “LifeSight’s plans to launch R-CDC build on WTW’s experience and leadership in the UK’s development of CDC pensions. WTW advised Royal Mail on the development of their CDC scheme, the first of its kind in the UK, and currently serve as scheme actuary to the Royal Mail Collective Pension Plan.

“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 Government to bring to life the vision of CDC pensions for DC savers.”