A new type of pension scheme delivering reliable returns – and
potentially boosting retirement incomes for millions, will soon
become a reality after regulations were laid in Parliament.
The new Collective Defined Contribution pension will see both the
employer and employee pay into a collective fund, with pensions
paid out from this shared pot.
Benefits of the new scheme include that it offers predictable
costs for the employer, and is more resilient against economic
shocks, such as those caused by the pandemic.
Minister for Pensions, , said:
I am very pleased that these schemes will soon be able to operate
in Great Britain.
We have seen the positive effect of these schemes in other
countries – and it is abundantly clear that when they are
well-designed and well-run they have the potential to provide a
positive outcome for savers, and can be resilient to market
shocks.
I have no doubt that millions of pension savers will benefit from
CDCs in the years to come.
Currently all pensions are either Defined Benefit, linked to
salary or length of service, or Defined Contribution where
pensions are based on how much you pay in.
The move also paves the way for the launch of the CDC scheme that Royal
Mail and the Communication Workers Union aim to introduce.
Regulations laid before Parliament will provide the foundation
for CDCschemes to be
introduced in Great Britain.
The regulations will help ensure that CDC schemes are set up
and run well by providing clear criteria for the Pensions
Regulator to authorise and supervise them.
The department will now continue to engage with a wide range of
interested parties on how CDCs can be extended further.
These parties include employers interested in establishing
multi-employer CDC schemes and some
Master Trusts.
Additional information
The Pension Schemes Act 2021 introduces an authorisation and
supervision regime for CDC schemes, which will
help ensure that:
- only schemes that are well run and built on sound foundations
are allowed to operate
- schemes must have a clear strategy and resources to deal with
any problems that may arise;
- schemes must have an effective framework for communicating
with members
- the interests of members continue to be protected throughout
the life of the scheme
- the Pensions Regulator has appropriate powers to intervene
when necessary
Further information about The Occupational Pension
Schemes (Collective Money Purchase Schemes) Regulations 2021
can be found on GOV UK.
