Government launches consultation on CDC pension schemes

The government has set out the details of its consultation on plans to introduce collective defined contribution (CDC) pension schemes. These schemes work by pooling the investments of scheme members and aiming at a target benefit level. Among the benefits are the sharing of longevity risk among members, offering an attractive scheme to those who are uncomfortable with complex decisions late in their careers and reducing balance sheet risks for employers.

Growing interest in CDC schemes has prompted the consultation, with the House of Commons Work and Pensions Select Committee recently calling on the government to legislate for their introduction. 

Welcoming the consultation, Trades Union Congress General Secretary Frances O’Grady said, “Workers saving for retirement are crying out for an alternative to the pensions lottery they face, which heaps all the risk on their shoulders." She added that the risk-sharing involved in CDC schemes "give savers a better chance of a decent standard of living in old age".