Government papers: Collective defined contribution pensions

The Work and Pensions Committee has published its report into collective defined contribution (CDC) pensions. These schemes offer a half-way ground between defined contribution (DC) and defined benefit (DB) pensions.

Key findings

• Through the pooling of risk, CDC offers scheme members the potential for better pensions than from standard DC saving. For employers keen to offer their workers decent pensions but reluctant to take on large potential liabilities, CDC is an attractive alternative to DB schemes.
• Establishing CDC schemes in the UK opens the possibility of more diverse and ambitious provision of collective pensions. These could include industry or profession-wide schemes.
• CDC may offer an opportunity to provide more attractive pension options to self-employed people and gig economy workers.
• The committee urges the government to build on its initiative with the Royal Mail pension scheme to bring about the next great pensions revolution and restore the UK to being among the very best pension systems in the world.

This report outlines a number of recommendations for the introduction of CDC pensions. It also proposes several consultations to shape the future of CDC pensions. The industry now waits for a response from the government.