A new type of occupational pension scheme authorised to operate in UK
14 March 2022
New legislation has enabled Collective Money Purchase (CMP) schemes to apply to The Pensions Regulator for authorisation to operate in Great Britain. CMP schemes can also be referred to as Collective Defined Contribution (CDC) schemes.
Currently, employers and employees only have the choice of using defined benefit (DB) schemes or defined contribution (DC) schemes. The new scheme type involves investment of all contributions with opportunity for higher returns than other defined contribution schemes. The collective nature of the schemes means that investment risks are shared between the membership and employers, whilst pensioners will receive an income which is designed to achieve a balance between the scheme’s assets and the provision of benefits. CMP schemes will also require actuarial valuations every year.
The government believes this will be more sustainable for both employers and employees and has the potential to offer better outcomes for pension scheme members. The Department for Work and Pensions have outlined application requirements and authorisation criteria to ensure only well-run schemes are allowed to operate. These include ensuring that persons involved in key capacities relating to these schemes are fit and proper and that the scheme has sufficient financial resources to meet the costs of setting up and running the scheme, with additional resources to take necessary steps if things go wrong. Further legislation is expected to be laid in front of parliament this month, relating to modifications and consequential/miscellaneous amendments.
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