The Pensions Regulator (TPR) in the UK is paving the way for an expansion in the collective defined contribution (CDC) market with the launch of a consultation on a new code of practice.
The regulator is asking the industry to respond to its consultation on a new CDC code of practice allowing for the introduction of multi-employer schemes from next summer.
The revised code sets out the criteria for authorisation, the regulator’s expectations of multi-employer CDC schemes, and how it will use its powers to support this new innovation to market.
Building on the existing code for single employer CDC, the consultation includes new expectations such as the way a pension scheme is promoted or marketed, fitness and propriety of key personnel associated with the scheme, as well as the company or person that financially supports the scheme.
The regulator claimed that CDC pension funds can provide a potentially higher retirement income than defined contribution (DC) funds, and members of such funds do not have to make difficult decisions as they approach retirement.
Until recently, legislation only allowed for single-employer schemes. The new regulations and revised code will allow third-party propositions that can offer their pension fund to multiple unconnected employers to come to market.
The consultation follows the government’s publishing of multi-employer CDC regulations on 23 October. The regulations are expected to come into force at the end of July 2026, on the same day as TPR’s revised code.
TPR anticipates being able to accept applications from the beginning of August, and schemes could be operating in early 2027.
Currently, the regulator is only able to authorise single-employer pension funds and is working with the Department for Work and Pensions (DWP) on the third stage of establishing a CDC market in the UK – retirement-only CDC schemes.
“We’re determined to help turn a savings system into a pension system which provides a sustainable income through later life”
Nausicaa Delfas, TPR’s CEO
TPR’s chief executive officer, Nausicaa Delfas, said: “We’re determined to help turn a savings system into a pension system which provides a sustainable income through later life. CDC could play a role in this, and our consultation marks an exciting development in the journey to help make this innovation available to more people.
“It’s important that new models provide security and value, and we welcome views on our consultation to make sure that the balance is right.”
The consultation was widely welcomed by the industry.
Paul Waters, head of DC markets at Hymans Robertson, said: “Today’s draft Code of Practice provides the next level of detail needed for the industry to deliver whole of life UMES CDC schemes effectively.
“The principles and benefits of CDC – sharing investment and longevity risk across members to deliver a higher, secure income for life are clear. As are the trade-offs – forgoing the flexibility, control and ability to pass on unspent pot as in DC, and without the certainty that comes from an annuity.”
Waters said the code allows the industry to further develop the detailed design points needed for a successful CDC scheme, such as business plans, continuity plans, governance processes and structures, investment strategy, communications and actuarial approaches.
“Much of the design work has already been prepared by the most advanced scheme proprietors, and the draft Code provides the next level of detail. It also helps proprietors prepare for authorisation by the Pensions Regulator,” he noted.
Helen Forrest Hall, chief strategy officer at the Pensions Management Institute (PMI), added that multi-employer schemes must be underpinned by robust governance, financial security and strong member communications.
“The PMI has long supported the CDC model and will engage fully in the development of a multi-employer Code of Practice that expands choice while maintaining high standards that protect savers in this new retirement era,” she said.
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