The Pensions Regulator has set out its risk-based regulatory approach to collective defined contribution schemes and how providers can expect it to supervise them, including its use of risk notices.

TPR can issue risk notices when it is concerned a CDC pension scheme is not being effectively run, governed or funded, it said as it published its CDC compliance and enforcement policy on Wednesday.

It said it will use the risk notices where it wants to see trustees “planning corrective action, which they must then deliver”. Risk notices can be used instead or in advance of more serious powers, such as de-authorisation.

Executive director of market oversight Neil Bull said: “We support innovation in the market that benefits savers and believe CDCs offer trustees and employers a further option to provide members with a pension. But we expect savers to be protected.”

Bull added: “We are excited about the government’s commitment to widening CDCs to multi-employer schemes.”

The regulator reassured industry it will supervise CDC schemes “in a collaborative and proportionate way”.

Its supervisory approach includes sending CDC scheme trustees an annual evaluation regulatory report which summarises the regulator’s evaluation of the scheme, intended supervisory intensity, key risks observed, actions it expects the scheme to take and the planned engagement timetable. The frequency and detail of supervision of CDC schemes will be kept under review, TPR said, and will depend on the scheme’s level of risk.

Single employer CDC schemes were legislated for in the Pension Schemes Act 2021 and require authorisation from TPR, with the Royal Mail so far the only employer to opt for this type of risk-sharing arrangement; its scheme became operative last month, following years of discussion and planning with unions and government.

A consultation on extending whole-life CDC to multi-employer schemes closes on 19 November, with some DC master trusts expected to be offering this in future.

TPR’s compliance and enforcement policy states that as well as supervising single schemes, it will also monitor the CDC industry as a whole to identify key risks relating to the market, and the best way to manage and mitigate them.