Legislation to enable retirement-only collective defined contribution arrangements will be introduced this year, the pensions minister said at the Pensions UK Investment Conference in Edinburgh on Wednesday.

The government is moving at pace on retirement CDC, ahead of master trusts having to have default pension income solutions in place in 2027. Torsten Bell has now said that legislation for retirement-only CDC will be introduced this year. 

“We will bring forward the legislation to underpin retirement-only CDC this year,” he told an audience at the investment conference on Wednesday morning. “We’ve done it for single employers, we've done it for multi-employers this year. Retirement CDC will also happen this year.” 

His remarks come after the industry had asked government in December to introduce decumulation CDC ahead of guided retirement, fearing that once trustees have settled on a retirement default for their members, they might not change it again soon. 

Several providers and master trusts are planning to offer retirement CDC once legislation allows it. LifeSight, the UK master trust affiliated with WTW, is one of them. The firm claims that having CDC in retirement after DC in accumulation will boost expected retirement outcomes by 40% compared with annuities. 

“By being able to invest in growth assets for much longer, we think you can get demonstrably better returns,” said senior director at WTW, Ben Johnson.

He argued that retirement CDC leads to better outcomes not just than annuitisation but also 'flex and fix' propositions, where drawdown is followed by annuitisation.

“We believe retirement CDC will be the best default option for the vast majority of DC members reaching retirement,” Johnson said.

Others are also working on their solution. £40bn master trust the People’s Pension is planning to launch a retirement product “at the back end of this year”, its deputy chief investment officer Phil Butler told mallowstreet, though this will not be a CDC product.*

“We're looking at retirement products generally,” he said. 

The master trust is speaking with consultants about what it calls ‘guided income’ – Butler described these as pathways for members to either cash out, move into an income product, buy an annuity or remain invested. 

“It's about giving them the optionality but also having a default journey, so people don't automatically get cashed out or [end up in] the wrong product,” he said. 

The accumulation and decumulation phases need to be connected, he stressed.  

“What's the right level of risk for your members when you start going down the glidepath, how long, how rapidly, what's your end level of risk, and then how do you pivot into products? It's actually really important,” he said. 

Master trusts will be the first to offer default pension options, with group personal pension providers and single employer trusts only following a year later.

Smart Pension’s director of policy, Joe Dabrowski, said not every solution will suit the majority of savers and employers: “Work and careers take many paths, and retirement itself is rarely a single, sudden step; for many, the transition from work to retirement is gradual and increasingly flexible. That’s why our focus should be on making defined contribution schemes work better for modern retirement - more adaptable and aligned to today's reality.” 

Dabrowski, who recently joined Smart from Pensions UK, said the sequencing of the regulations and implementation of the multiple changes in train is important. 

  

“They will need careful thought to make sure they work effectively, and to fully realise the intended benefits, including for new at-retirement decumulation and CDC options,” he said. 

The plan to introduce legislation for retirement CDC this year suggests government is on the same page about bringing this option in before guided retirement becomes compulsory. 

The Department for Work and Pensions is already expanding CDC with regulations at the end of July, allowing multi-employer funds to offer it. TPR is consulting on an updated CDC code, due to come in on the same day as the regulations. The regulator anticipates it will be able to accept applications for authorisation for multi-employer CDC from August, saying schemes could be operational in early 2027.