She said: “This could give rise to difficulties where a retirement CDC scheme has little to no proven track record.”
The UK pensions industry has broadly welcomed the government’s consultation on Retirement Collective Defined Contribution (CDC) pension funds, but warns that poor sequencing could undermine the reforms before they get off the ground.
The consultation, launched in October, seeks industry views on proposals to create a CDC option for individuals at the point of retirement.
The model would allow savers to transfer their defined contribution (DC) pots into a collective fund paying a trustee-managed, variable lifetime income linked to investment performance and scheme sustainability.
Consultancy firm LCP said the product could play a valuable role in the retirement market by giving DC savers access to a CDC option at retirement. But it also stressed that the reforms will only succeed if the government tackles the lack of public understanding of retirement products.
Steven Taylor, head of CDC at LCP, said: “CDC at retirement could be a game-changer, but only if people understand it. Engagement with pensions outside the industry is low, and that makes introducing new options a real challenge. If we want CDC to succeed, we need a clear education strategy, so savers know what’s on offer and why it matters.”
Helen Forrest Hall, chief strategy officer at the Pensions Management Institute (PMI), echoed the call for proportionate regulation and emphasised the need for trustee confidence and informed member choice.
“CDC at retirement could be a game-changer, but only if people understand it”
Steven Taylor, head of CDC at LCP
She said: “We urge the government to revisit restrictions on member marketing, address concerns around irrevocable defaults, and ensure retirement CDC is integrated into the wider guided retirement framework. With careful design and a level playing field, CDC can become a trusted and valuable part of the UK pensions landscape.”
Forrest Hall also questioned the sequencing set out in the Pensions Roadmap, arguing that guided retirement and CDC reforms should follow measures such as small pot consolidation and scale requirements.
This, she said, would give pension funds time to pilot solutions and work with regulators to develop better defaults and improve DC adequacy.
Helen Ball, partner at Sackers, also flagged concerns about sequencing and its potential to blunt the reforms.
“If guided retirement is introduced before retirement CDC schemes become available, the government might miss its best opportunity here – that’s because it may then be too late for CDC schemes to take off if alternative default retirement solutions have already been chosen,” she explained.
Ball noted additional hurdles for pension funds looking to use CDC as part of a default solution.
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Pamela is IPE's UK correspondent.
Before joining IPE in May 2023, she spent five years writing about the insurance industry.
During her career so far she won awards for Most Promising Newcomer in 2020 and Best Investigative Article in 2022 from the British Insurance Brokers Association, and was also highly commended at the WTW Media Awards for Insurance Features Journalist of The Year.View full Profile
