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The Department for Work and Pensions is seeking views on draft regulations that set out what collective defined contribution schemes must do to become authorised, to operate effectively in the market under regulatory oversight, and what happens if changes need to be made to their schemes.
Similar to DC master trusts, under the regulations currently proposed CDC schemes would need to show:
that the persons involved in the scheme are fit and proper persons;
that the design of the scheme is sound;
that the scheme is financially sustainable;
that the scheme has adequate systems and processes for communicating with members and others;
that the systems and processes used in running the scheme are sufficient to ensure that it is run effectively; and
that the scheme has an adequate continuity strategy.
Consultation is only the first step
Pensions minister Guy Opperman said: "CDC schemes can only succeed if there is confidence in this new type of provision. These regulations will help ensure that CDC schemes are set up and run well by providing clear criteria by which the Pensions Regulator will authorise and supervise these schemes."
He said the draft regulations are a huge step towards fulfilling the government's commitment to legislate for single employer and connected multi-employer CDC schemes, but that many want to see non-connected multi-employer CDC schemes, master trusts and decumulation only CDC schemes.
"Right now our priority is to ensure the full framework for single employers and connected multi-employer CDC schemes is in place as soon as we can, and this consultation is rightly focused on delivering that," said Opperman, and added: "But we are not deaf to calls from those who wish us to go further. Once this first step is done we will turn our attention to the growing demand for these other types of provision."
Proponents urge DWP to bring in multi-employer CDC
Supporters of CDC were be pleased to hear this but would like to see action as soon as possible. Chintan Gandhi, head of CDC at consultancy Aon, urged the pensions minister to press ahead with drafting its proposed regulations covering multi-employer CDC schemes, and also those provided through commercial master trusts.
“That is especially so given that two-thirds of those who responded to the RSA CDC Forum’s recent survey said that these approaches to CDC would actually work better for them. Given satisfactory legislation, 25% of the respondents said they would be likely or very likely to set up a CDC scheme within the next five years,” he noted.
The consultation includes 18 questions and closes in six weeks' time, on 31 August.
Are you keen to see multi-employer and decumulation CDC?
