Calls to clarify roles as CDC code consultation closes
Image: Markus Winkler/Pexels
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
Industry representatives have welcomed the Pensions Regulator’s new code for collective defined contribution schemes – which now includes multi-employer CDC – on which a consultation closes on Friday but want TPR to clarify the roles and responsibilities of trustees among others.
New expectations compared with the code for single employer CDC include that there is a company or person that financially supports the scheme, the way the scheme is promoted or marketed, and the fitness and propriety of key personnel associated with the scheme.
The Association of Professional Pension Trustees highlighted the promotion and marketing expectations as an area where “there are concerns and potential contradictions regarding the role and responsiblities of trustees”.
TPR’s draft code prohibits trustees from promoting CDC schemes, and to review promotional material and activity. The APPT said that “this presents potentially conflicting obligations on trustees”, suggesting that since it is not a trustee’s role to market a scheme, any obligations should fall on the scheme proprietor.
New expectations compared with the code for single employer CDC include that there is a company or person that financially supports the scheme, the way the scheme is promoted or marketed, and the fitness and propriety of key personnel associated with the scheme.
The Association of Professional Pension Trustees highlighted the promotion and marketing expectations as an area where “there are concerns and potential contradictions regarding the role and responsiblities of trustees”.
TPR’s draft code prohibits trustees from promoting CDC schemes, and to review promotional material and activity. The APPT said that “this presents potentially conflicting obligations on trustees”, suggesting that since it is not a trustee’s role to market a scheme, any obligations should fall on the scheme proprietor.
It does “not feel practical” for trustees to approve a “long list” of documents in the code, the APPT added; instead, they should agree the core messages within a policy, with the proprietor then ensuring that marketing aligns with this.
The association also warned of a “grey area” as the code suggests that, while not marketing the scheme, trustees are allowed to provide information about a scheme to employers.
“It would be useful to have more robust guidelines to ensure this does not inadvertently form any sort of promotion or marketing,” the APPT argued.
Elsewhere, the association said the separate authorisation of each section of a CDC scheme would become cumbersome.
Some have said the code should make it clear what trustees’ duties are. Helen Ball, partner at law firm Sackers, said trustees’ legal duties must be acknowledged.
“In our consultation response, we emphasise the importance of recognising trustees’ overarching trust law duties because the nature of CDC schemes is likely to involve CDC trustees weighing up different stakeholder interests over time. We suggest making these duties more explicit within the code to support trustees in their decision-making,” she said. “This is crucial given the potential for complex questions around fairness and intergenerational matters in CDC schemes.”
“It would be useful to have more robust guidelines to ensure this does not inadvertently form any sort of promotion or marketing,” the APPT argued.
Elsewhere, the association said the separate authorisation of each section of a CDC scheme would become cumbersome.
Some have said the code should make it clear what trustees’ duties are. Helen Ball, partner at law firm Sackers, said trustees’ legal duties must be acknowledged.
“In our consultation response, we emphasise the importance of recognising trustees’ overarching trust law duties because the nature of CDC schemes is likely to involve CDC trustees weighing up different stakeholder interests over time. We suggest making these duties more explicit within the code to support trustees in their decision-making,” she said. “This is crucial given the potential for complex questions around fairness and intergenerational matters in CDC schemes.”
Sackers would also encourage TPR to clarify the responsibilities of different parties involved in multi-employer CDC schemes, “especially regarding the preparation and approval of business plans, and promotion and marketing obligations”.
'Significantly more restrictive than the legislation'
The Association of Consulting Actuaries has welcomed the draft code but said it appears “significantly more restrictive than the legislation and would effectively mean it is not possible to amend the investment strategy relating to existing benefits”.
The association said the code should mirror the legislation more closely to avoid what it called “over-sectionalisation” of schemes, “which would negate the benefits of pooling in CDC”.
The ACA also pointed out that the regulator refers to guidance and standards issued by the Financial Reporting Council on setting accrual rates, but that the FRC only published these on 9 February, with a consultation closing on 23 March.
The ACA commented on marketing as well. Honorary secretary Chintan Gandhi, who is head of CDC at Aon, said: “We suggest that the code should require that any scheme which intends to make use of the legislative carve-out from the requirements for promotion and marketing – on the grounds that no promotion or marketing will be carried out – must make this clear in its application for authorisation and explain how it can operate without any promotion or marketing to employers.”
The Society of Pensions Professionals has warned against adding regulatory burdens. It wants greater clarity on where requirements differ for scheme types and calls on TPR “to avoid disproportionate or overly prescriptive measures which may cause undue barriers for new entrants into the market”.
Keith McInally, chair of the society’s CDC Committee, said a unified CDC code of practice should help to reduce fragmentation but added: “Proportionate implementation will be important to ensure that TPR is clear regarding its expectations for CDC schemes, whilst also avoiding unnecessary regulatory burdens.”
Additional guidance around the expectations of scheme proprietors in multi-employer CDC, as well as business plans and continuity strategies, and around fitness and propriety expectations, should be issued, the SPP agreed. Further detail on TPR’s expectations regarding systems and processes would also be welcomed by the society.
TPR’s revised code is set to come in on the same day as the regulations for multi-employer CDC, which are expected to apply from 31 July 2026. The regulator anticipates it will be able to accept applications for authorisation from August, saying schemes could be operational in early 2027.
Do you share the concern about roles and responsibilities in CDC?
Additional guidance around the expectations of scheme proprietors in multi-employer CDC, as well as business plans and continuity strategies, and around fitness and propriety expectations, should be issued, the SPP agreed. Further detail on TPR’s expectations regarding systems and processes would also be welcomed by the society.
TPR’s revised code is set to come in on the same day as the regulations for multi-employer CDC, which are expected to apply from 31 July 2026. The regulator anticipates it will be able to accept applications for authorisation from August, saying schemes could be operational in early 2027.
Do you share the concern about roles and responsibilities in CDC?
