Extending Opportunities for Collective Defined Contribution Pension Schemes

The Department for Work and Pensions (DWP) has launched another consultation relating to collective defined contribution pension schemes (CDCs). Specifically, the DWP seeks to broaden the opportunities of CDCs „beyond single or connected employer schemes to accommodate multi-employer schemes“ and master trust schemes which could provide „whole-life“ pension products accumulating and decumulating pension benefits – or either of the two. Additionally, the DWP seeks views and industry input on the design of such CDCs particularly in view of establishing decumulation products.
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Based on recent industry feedback, it is evident to the DWP that „whole-life“ multiple employers defined contribution pension schemes are highly favored over single employer schemes as demographics are changing towards multiple employments and as multiple employer CDCs could take advantage of economies of scale. Additionally, the expansion of the scope of products offered by CDCs would ascertain that such schemes could offer products covering the entire life of scheme members, from the time they are still employed to their final retirement phase. Therefore, the Department seeks feedback on some general issues that need to be considered when contemplating the introduction of multi-employer CDC schemes, including, among others
(1) the key principles that should govern such multi-employer CDCs, including – for instance – that they are trust based only, they are required to be authorized, or they are subject to the 0.75% charge cap;
(2) specific requirements that should be imposed upon scheme trustees and managers, e.g. with respect to the fit and proper criteria or with respect to the marketing of the CDCs;
(3) obligations to ensure accountability of a multi-employer CDC particularly in view of financial resources and continuity (e.g. via the implementation of a scheme funder requirement); or
(4) the disclosure requirements of CDC schemes or the annual valuation requirements of schemes to adjust the benefits in accordance with the assets contained in the scheme and the assumed withdrawals.
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As the above summary only briefly describes the key issues discussed in the consultation, please refer to the original document for more detailed, comprehensive information. It shall be noted in this context that the consultation is high-level only which means that there are no particular regulations or rule amendments proposed in the document.
The consultation will be open for public comment up to March 27, 2023 and is likely to be of interest to pension scheme trustees and managers, sponsors of CDC schemes, and employers.