The regulator wants there to be “no surprises” as the pensions industry explores innovative concepts such as collective defined contribution (CDC) pension schemes.
The Pensions Regulator (TPR) has opened its application process for multi-employer CDC pension schemes, with providers expected to begin submitting their proposals later this year.
The new application process builds on the single-employer system introduced in 2021 to facilitate the launch of Royal Mail’s CDC scheme. TPT Retirement Solutions has already set out its plans to launch a CDC scheme, and the Church of England Pensions Board has also expressed interest in the model.
TPR also published fresh guidance around the promotion and marketing of CDC schemes and sectionalisation. It has also updated guidance relating to systems, processes and fees.
In a statement on Friday (31 August), the regulator urged organisations considering CDC to “engage early with TPR… to support a smooth authorisation process and avoid surprises”.
Richard Knox, executive director of strategy, policy and analysis at the Pensions Regulator, said: “At the Pensions Regulator, we want everyone to be able to achieve a sustainable income in retirement, and multi-employer CDC schemes could become an important part of the pensions landscape to support this goal.
“We also want a no-surprises approach as new innovations like CDC come to market. That is why we encourage anyone considering establishing a scheme to engage with us early so we can support the process.”
‘Landmark moment’ for UK pensions
Former pensions minister Guy Opperman – now a strategic adviser to Aptia – described the launch of the multi-employer CDC regime as a “landmark moment for UK pensions”.
During his term as pensions minister, Opperman oversaw the first steps towards the CDC regime.
He continued: “CDC has the potential to be a game-changer, offering significantly improved member outcomes and greater income stability in retirement at a time when many people are worried about their financial future.
“The focus now must be on turning the promise of CDC into practical, trusted solutions. That means building awareness and understanding, delivering clear and engaging member communications, achieving the scale needed to maximise value, and maintaining strong governance.
“If government, regulators and the pensions industry work together, CDC can become a mainstream feature of the UK retirement system and help deliver brighter futures for generations of savers.”
From policy to delivery
Paul Waters, head of DC markets at Hymans Robertson, described the dawn of multi-employer CDC schemes as “one of the most significant innovations in UK pension provision for many years”.
“It’s also an important moment for TPR, whose role in scrutinising and authorising schemes will be critical in building confidence throughout the industry as the market develops,” Waters continued. “Reaching this stage has required substantial collaboration across government, regulators, providers and advisers, and it’s important to recognise the work that has gone into creating a robust framework for these new schemes.”
Helen Ball, partner at Sackers, added: “As policymakers continue to focus on retirement adequacy, CDC schemes could be a promising way to help bridge the pension income gap while also meeting the government’s vision for future default pensions under guided retirement.
“The challenge now shifts from policy to delivery. All parties involved in CDC projects – whether providers, trustees or employers – will be keen to make the most of this opportunity to create lasting improvements in retirement outcomes. We look forward to doing our part to help make this a success.”
“The experience of the first generation of authorised schemes will be critical in building confidence across the market and demonstrating how multi-employer CDC can deliver in practice for employers and members.”
Dan McLaughlin, UK country head at Festina Finance, said operational aspects such as data, administration processes and technology infrastructure were “critical to managing complex calculations, supporting effective decision-making, and communicating clearly with members”.
McLaughlin also highlighted that surveys of industry professionals had shown both a growing interest in CDC but also “a degree of caution”.
“CDC has the potential to become a credible third way between traditional defined benefit and defined contribution models, providing the industry with an exciting opportunity to rethink how retirement outcomes can be delivered,” McLaughlin said.
“However, getting the operational foundations right will be essential to building confidence among trustees, employers and members.
“The broader industry has seen how transitioning to a new system or product can create systemic risks. The right technology and operational capability will help schemes manage CDC effectively, adapt as requirements evolve, and ultimately realise the full potential of this new model.”
Hymans Robertson’s Waters said the ultimate success of CDC would depend on scheme design and governance. “The experience of the first generation of authorised schemes will be critical in building confidence across the market and demonstrating how multi-employer CDC can deliver in practice for both employers and members,” he said.
