The Department for Work and Pensions (DWP) has today (30 January 2023) launched a consultation “Extending Opportunities for Collective Defined Contribution Pension Schemes” seeking views on the potential framework for multi-employer and Master Trust schemes to provide “whole-life” CDC (ie both accumulation and decumulation) and decumulation-only CDC. The consultation marks a significant step towards meeting the Government’s ambition of making CDC provision more widely available.
The consultation sets out how CDC might be provided through trust-based arrangements with appropriate oversight by The Pensions Regulator (TPR).
The DWP notes from their initial engagement with stakeholders that there is strong interest in whole-life CDC multi-employer schemes and also interest in CDC decumulation-only arrangements. Stakeholders’ feedback favoured designs with greater flexibility than those currently permitted, for example, by allowing differing or varying contribution (and accrual) rates by member and over time.
The consultation considers the authorisation process for these new types of CDC schemes, envisaging carrying forward the current authorisation criteria for a CDC scheme, including requirements around fit and proper persons, “sound” scheme design, financial sustainability, systems and processes for effective communications with members and running the scheme, and having an adequate continuity strategy. The DWP then seeks views on where the requirements may need to be amended for multi-employer or Master Trust schemes.
Decumulation-only arrangements are considered separately in the consultation, although the key principles set out for whole-life multi-employer schemes considered earlier in the document are expected to apply. The key areas the DWP wish to consider are who would meet the costs of establishing and operating the arrangements, how the arrangements would achieve and maintain sufficient scale, the mechanism for determining the price at which individuals buy into the CDC arrangement including the potential for mortality underwriting, how member communications can be made to work, and enabling reasonable comparison between options across the market.
The consultation period begins on 30 January 2023 and will run until 27 March 2023.
