The Department for Work and Pensions is consulting on draft regulations needed to extend the collective defined contribution framework to schemes for unconnected employers, a day after the launch of the UK’s first single employer CDC scheme. 

The government previously consulted on extending CDC to non-associated employers in January last year and is now proposing draft regulations in a consultation running until 19 November.

Tuesday's consultation sets out what multi-employer CDC schemes need to do to become authorised. It relates to whole-of-life CDC schemes only, although the DWP says it is interested in speaking with anyone who is exploring or developing trust-based decumulation-only CDC. 

The consultation on CDC for unconnected employers asks questions including on the minimum number of people needed to run a scheme, costs and likely market size, but the government would also welcome views on whether the regulations effectively deliver the intended outcomes.  

Pensions minister Emma Reynolds said: “People work hard to put money aside for their pension with every pay cheque. This significant innovation will offer a more predictable income and greater finance security for future pensioners.”  

Reynolds said she is bringing in CDC expansion so that "as many savers as possible can take advantage of the numerous benefits of CDC”, such as a seamless transition to a regular retirement income. She added that by pooling longevity and investment risk, “CDC schemes can also shield savers from much of the uncertainty faced by members of DC schemes”.   

The pooling will also allow CDC schemes “to invest in illiquid and more productive investments over the long term, including in UK businesses”, Reynolds said, adding that this would lead to economic growth, the key aim of her pensions review. 

The Pensions Regulator’s chief executive, Nausicaa Delfas, said multi-employer CDC has “the potential to deliver better outcomes” for savers, turning a pension pot into a retirement income.    

“I encourage industry to take part in the consultation and we look forward to working with government to develop an appropriate regulatory regime,” Delfas said.  

CDC schemes for single employers have found limited interest to date, with only Royal Mail publicly committing to it and working with unions and government to bring about the original legislation.   

However, it is expected that multi-employer CDC could become one of the products offered by master trusts, and might be considered by large organisations with different underlying employers.  

The Church of England could become one of them. John Ball, chief executive of the Church of England Pensions Board, said: “We welcome the publication today of draft regulations that support the creation of multi-employer CDC pension schemes. We look forward to scrutinising the detail, and to seeing how in due course, such an arrangement might transform retirement plans for those who work for the Church.”  

Andy O'Regan, client and strategic partnerships director at provider TPT Retirement Solutions, said the new rules will make it possible for all employers to provide their staff with a CDC pension scheme.   

“We’ve already been speaking to around 200 employers who have expressed interest in how a CDC scheme could be delivered for their employees,” O’Regan said. “This consultation will open the door to CDC for all employers regardless of size, with the first multi-employer CDC scheme potentially launching within a couple of years.” 

CDC has many supporters but is not without its critics, who question how CDC can provide substantially higher returns than DC.  

 
 

   

   

   

Would you welcome multi-employer CDC schemes?