The government has announced plans to move to the draft regulations for multi-employer collective defined contribution (CDCs) pensions towards the end of this year and the beginning of next. This came in light of the consideration by the House of Commons Delegated Legislation Committee of the Draft Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022. Whilst the contributions to CDCs are fixed, like defined contribution schemes, they also provide members with a “target” specified level of benefit.[1] Pensions Minister, Guy Opperman, has confirmed that there will be an opportunity for the industry to read and respond to the regulations and draft code. He believes they will be a cost-effective way of saving for retirement.
Whilst industry commentators have raised concerns about the use of master trusts as a model or template for CDC schemes, Opperman stated the two pension models were “not a like-for-like”. However, as noted in our February 2022 article[2], the introduction of CDCs could be of interest to master trust providers looking at this potential future offering. Indeed, the structure of master trusts presents advantages, being able to provide a mass market product covering larger populations than those schemes that are set up for a single corporate group. Master trusts also already have governance systems in place with effective investment, communication and administration expertise which will be able to deal with the authorisation and supervision regime that the Pensions Regulator will introduce for CDCs.
Given that the timeline for these draft regulations is not yet certain, master trust providers have time to consider the commercial advantages of offering CDCs. With the government’s plan to allow opportunities for experts, stakeholders, politicians and the Department for Work and Pensions to review CDCs as they develop, industry attitudes and opinions will also develop and the future role of CDCs and master trusts on the pension’s landscape will become clearer.
[1] See our article “Collective Defined Contribution – A new type of pension scheme in the UK” for further information on CDCs.
