DWP launches new type of pension scheme for people saving for retirement years
01.08.2022 - 14:57
/ dailyrecord.co.uk
A new type of pension scheme has opened for applications across the UK. Collective Defined Contribution (CDC) schemes will offer retirement savers a ‘middle ground’ option between existing schemes.
With defined benefit (DB) schemes, such as final salary schemes, employees are promised a guaranteed income, and with defined contribution (DC) schemes, which are more common nowadays, the saver bears the risk of how much pension they eventually end up with. DB schemes have become increasingly rare as they are expensive to run with people living for longer.
The Department for Work and Pensions (DWP) said that CDCs have the potential to provide improved retirement returns for savers, with more predictable costs for employers. Both employers and employees contribute to a collective fund from which individual retirement incomes are drawn, with trustees responsible for oversight to ensure schemes are viable and can meet their legal requirements and commitments to members.
Minister for Pensions Guy Opperman said: “CDC schemes have the potential to transform the UK pensions landscape.
“We have seen the positive effect of these schemes in other countries and it is abundantly clear that, when well designed and well run, they have the potential to provide a better retirement outcome for members, 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.”
The new schemes were made possible following the passage last year of the Pension Schemes Act.
Regulations currently provide for single CDC schemes or ones where employers have some sort of connection.
Some parties have already expressed an interest in expanding CDC models, including multi-employer CDC schemes, the