Collective Defined Contribution pension scheme legislation expected in August 2022

17 December 2021

The Department for Work and Pensions (DWP) is working to legislate for Collective Defined Contribution (CDC) pension schemes, currently picking up traction in other nations. This will pave the way for Royal Mail and the Communications Workers Union to introduce the CDC pension scheme they have been working to bring to employees since 2018. 

The Pension Schemes Act 2021 introduced the framework to allow CDC pensions schemes to be administered and Minister for Pensions, Guy Opperman, hopes “Millions of pension savers will benefit from CDCs in the years to come.”

CDC schemes operate where all members contribute to the same pot, a Collective Money Purchase (CMP) scheme. Where these schemes differ from annuities and defined benefit schemes is that retirement income is estimated, rather than promised. This can vary depending on fund performance and needs to be effectively communicated to members, however, one of the benefits of CDC schemes is their resilience to market fluctuations.

In the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2021 consultation response, the DWP indicates that the legislation will come into force on 1 August 2022, subject to parliamentary approval. Other legislation required for “necessary consequential and miscellaneous changes” will be made in February 2022.

The ongoing supervision of CDC schemes will be conducted by The Pension Regulator, which is expected to consult on its guidance and code of practice in January 2022.


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