Background

On 23 October 2025, DWP published a consultation seeking views on policy proposals for the creation of a new type of Collective Defined Contribution (“CDC”) scheme, which is to be used only by pensioner members – a “Retirement CDC scheme”. It also seeks views on a proposed legislative change to permit transfers of DC benefits to authorised CDC schemes without member consent.

In this response

General comments

Interplay between Retirement CDC and other policy initiatives and timing

The parallel workstream on Guided Retirement for trust-based schemes aims to ensure that default pension benefit solutions (“DPBS”) are made available for members who do not, or cannot, engage with their pension (see paragraphs 6 – 9 of the consultation). There are several other key parallel developments in the pensions space, including unconnected multi-employer CDC schemes (“UMES”) and the FCA’s framework for “targeted support”, as well as the policy considerations noted in Chapter 8 of the consultation.

As the DWP acknowledges in the helpful CDC roadmap at Annex C of the consultation, the sequencing of developments is key and our comments throughout this response are intended to assist the DWP with continuing to ensure that these initiatives fit together.

For this reason, it is not clear to us why the intention is to bring the Guided Retirement requirements into force before Retirement CDC schemes will be authorised and fully operational. In particular, DC Master Trusts are currently intended to become subject to the Guided Retirement requirements in 2027, but the Retirement CDC legislation and Code are not expected to be in force until 2028. Even single employer trusts, which are due to comply with Guided Retirement from 2028, may struggle to partner with a Retirement CDC scheme at the outset as, to be able to choose an alternative scheme to provide a DPBS, the trustees must be satisfied that it will provide members with a better outcome than any DPBS they could design and make available. If the scheme has no track record, they will find it difficult to be able to make such a decision, at least in the short-term.

In addition, it will be difficult for new Retirement CDC schemes to demonstrate that it is appropriate for them to be authorised until they are in operation. As the DWP states: “We anticipate that schemes will be able to demonstrate onflows of members to TPR at authorisation, to demonstrate how they will achieve scale and sustainability” (paragraph 58 of the consultation). However, if a Retirement CDC scheme cannot be a “qualifying pension benefit solution” for Guided Retirement purposes until it has been authorised, it would not be permitted for the trustees of another scheme to agree to transfer their members before authorisation has been granted, so it is difficult to see how Retirement CDC schemes will be able to demonstrate these onflows at the point of authorisation. In contrast, when the master trust regime, including the authorisation process, was developed, several master trusts were already in operation.

Further, Retirement CDC schemes, just like CDC in accumulation, need scale. This is likely to take time to achieve. Even after authorisation, it is not clear how the DWP anticipates that these schemes will begin to operate (eg for the first 10 or 100 members who transfer into the scheme). At this stage, they will not have sufficient scale for the cross-pooling benefits of CDC schemes, the scheme will immediately be paying out benefits to pensioner members and it will not have the buffer of other assets from any active members accruing benefits. If there are significant market fluctuations early in the life of a Retirement CDC scheme post-authorisation, this might lead to increased volatility in paying benefits. It is therefore important that member communications make clear this potential for volatility and explain how the Retirement CDC scheme will treat benefits during periods of significant market fluctuations before sufficient scale has been achieved.

Last, the current sequencing would mean that one of the key default retirement solutions will not be available when Guided Retirement is introduced, leaving schemes which wish to use Retirement CDC as a DPBS to adopt one or more alternatives in the interim. This makes it much less likely that Retirement CDC schemes will then be attractive to use as a DPBS. Switching a DPBS could not only incur additional time and cost for occupational pension scheme (“OPS”) trustees but also be difficult to communicate effectively to members.

Interaction with the DC Master Trust regime

As we noted in our November 2024 response to the DWP’s consultation on legislation to introduce UMES, the new UMES and Retirement CDC schemes and the DC Master Trust regimes will differ (for good reasons). It would be helpful to understand how the DWP sees the two regimes working together in practice, in particular where one provider offers both a DC Master Trust and Retirement CDC scheme (potentially within the same trust).

For example, Retirement CDC schemes, as for UMES, will need to have a single “scheme proprietor”. This is a point of difference from the DC Master Trust framework concepts of “scheme funder” and “scheme strategist”. This extends to a requirement for the scheme proprietor to finance the scheme in certain circumstances, in contrast to DC Master Trusts which can operate without a “scheme funder”. If DC Master Trust providers are the most likely candidates for setting up commercial CDC schemes, such difference in approach will need careful explanation to avoid creating unnecessary barriers to market entry.

OPS trustees as intermediaries

As the DWP recognises, building and maintaining confidence in Retirement CDC schemes “will be essential for ensuring their success and establishing them as a genuine retirement option” (paragraph 24 of the consultation). In our view, OPS trustees have a key role in this respect since the schemes will, at least initially, operate in a non-retail market. Authorised Retirement CDC schemes will form partnerships with DC OPS schemes, which then transfer their members at retirement. Individual members will not be able to choose a Retirement CDC product on the retail market. Before selecting a Retirement CDC scheme as a partner and transferring members, OPS trustees will need to have confidence that it offers a viable retirement option for their members.

Trustees will need to be satisfied that they can comply with their duties including their fiduciary duty, Guided Retirement requirements and communication / disclosure requirements. As part of this, trustees will need to determine that any transfer is in members’ interests and will provide a better outcome for members than remaining in the OPS. It is important that this is considered as part of the architecture of Retirement CDC schemes, and we have highlighted this in some of our responses to specific consultation questions below.

Specific consultation questions

Question 3: Should all business plan requirements that would apply to whole-life unconnected multiple employer CDC schemes also apply to Retirement CDC schemes? What, if anything, should change or be added?

We agree that it is sensible to require a rigorous business plan, and that this should form part of the safeguards to protect against excessive cross-subsidisation where an UMES seeks to enter the Retirement CDC market (see paragraph 18 of the consultation).

As discussed in our November 2024 response, we can see the importance of trustees, who are ultimately responsible for running the scheme and ensuring members’ benefits are paid out, understanding and being on board with the business plan. We raised some concerns about how the business plan requirements will work in UMES which apply equally to Retirement CDC schemes:

  • whether it is appropriate for trustees to “approve” all parts of the business plan (eg the “overall competence of the scheme proprietor”)[1]
  • the level of detail that trustees will be expected to check (eg on the key financial information) before they can give their approval
  • what will be in the Code, and whether these will be areas that trustees can “approve” and how they should go about approving them
  • what is the consequence if trustees do not approve the business plan (or more likely, do not approve any revisions to the plan) – is it expected that they just work things through with the scheme proprietor?
  • what are the consequences for trustees if there is something in the business plan that turns out to be wrong?
  • the scheme proprietor is expected to confirm that the business plan gives a “true and fair representation of the matters to which it relates” but the trustees only have to approve it[2] – does this mean that there is no expectation for trustees to “look behind” the information given to them by the scheme proprietor?

Question 5: What do you think the effects of the proposed adaptation to promotion and marketing criteria, including a prohibition on member marketing, would be?

We understand why the DWP may prefer for the promotion and marketing requirements to capture communications aimed at trustees and managers of OPSs, as these parties will be responsible for selecting a DPBS and this is likely to be the main route through which members join a Retirement CDC scheme.

We also understand the rationale for prohibiting promotion and marketing to prospective and existing members of Retirement CDC schemes, subject to exceptions, where Retirement CDC is not offered as a retail product. We expect that most individual members would be unlikely to consider Retirement CDC as a retirement option unless it was a DPBS, with the exception of well-informed and engaged members and members who have taken regulated financial advice.

However, the consequence of the proposed promotion and marketing criteria, and the fact that Retirement CDC will not be offered as a retail product, will be that there is much more onus on trustees of OPSs to determine whether they want to partner with a Retirement CDC scheme and if so, which one, and to carry out a thorough review of the options available.

Under the Guided Retirement requirements, trustees of OPSs will be required to send out various communications to members relating to any default Retirement CDC scheme, with details to be set out in regulations. This includes a description of the DPBS chosen as most suitable, and the trustees’ opinion as to what might be the circumstances of a person (in terms of age, pension savings etc) for whom the solution is suitable. Trustees will also need to provide members with information about accumulation and decumulation phases and the availability of a DPBS that will provide regular income during retirement (section 51 of the Pension Schemes Bill 2024/25).

We note the DWP’s concern that a Retirement CDC scheme should not look to circumvent the prohibition on marketing by producing materials for OPS trustees to pass on to members. However, OPS trustees will need to rely on information from those schemes in order to provide accurate information to members. Trustees would in any event need to review any materials provided by their partner scheme in line with their fiduciary duty, but changing wording provided by the partner scheme could be difficult for practical reasons, including the risk of misstating information about the scheme.

Where a Retirement CDC scheme is the DPBS, OPS trustees will need to walk a tightrope between compliance with the requirements to give information and an opinion about suitability under Guided Retirement and the promotion and marketing restrictions. We are concerned that this could discourage OPS trustees from selecting a Retirement CDC scheme as a DPBS.

It may be useful to provide OPS trustees with a specific exemption from the promotion and marketing restrictions where communications are being given under Guided Retirement, as well as guidance for trustees on how to avoid marketing or promoting a Retirement CDC scheme where it is the DPBS.

Please also see our comments at question 13 below in relation to member communications.

Question 7: What are your views on the risks, benefits and potential protections for members of FCA-regulated pension schemes being transferred to a Retirement CDC to access their pension savings?

We support the aim of bringing FCA-regulated pension schemes in scope of being transferred to a Retirement CDC scheme, which is in line with the DWP and FCA’s broader policy of achieving greater alignment between the contract and trust-based regimes. If members of FCA-regulated schemes are unable to access Retirement CDC, this would create a “two-tier” system, with only members of OPSs able to access the full suite of retirement options. While we acknowledge that there are different considerations for FCA-regulated schemes, many members will not have chosen their pension scheme themselves, having been automatically enrolled by their employer. If the ability to access retirement CDC will ultimately fall on whether your employer happened to have its own trust-based scheme or select a master trust as its auto-enrolment vehicle this would be particularly unfair from a member perspective. It would also seem to go against the policy aim of improving retirement options for all.

We also acknowledge that expanding Retirement CDC in this way could help build scale, since FCA-regulated pension schemes are such a significant part of the market. The Pensions Policy Institute estimated, in a September 2024 paper, that trust-based DC workplace pension schemes made up 8% of the total UK pensions market and contract-based (FCA-regulated) DC workplace schemes even more, at 10%.[3]

Important aspects to consider include:

  • the protections afforded to members of FCA-regulated schemes who transfer (for example, making sure that vulnerable customers retain the same level of support following transfer), and
  • who would make the decision to transfer out of the FCA-regulated scheme, and on what basis? Would legislation enable the transfer by allowing the scheme to “override” its contract with the member? What safeguards would apply? Trustees of OPSs are subject to various duties and restrictions, including their fiduciary duty to members. IGCs have a similar role but, currently, their focus is on ensuring contract-based schemes deliver value for money.

Question 9: What mechanisms should be introduced to ensure that quotations are accurate and not misleading?

We acknowledge the suggestion that, for practical reasons, Retirement CDC schemes “may wish to guarantee the terms of their quote, for a certain period, under their scheme design” (paragraph 95 of the consultation). However, any guarantee would need to be subject to restrictions, such as the length of the guaranteed period, to help ensure that it does not unduly disadvantage other scheme members, particularly where cohorting is used (see question 10 below).

Question 10: What are your comments on a ‘cohorting’ approach to helping well-performing schemes remain affordable for members and are there alternative approaches you would recommend? What should scheme rules on cohorting include? And does the illustrative drafting capture the policy intent and would this drafting work in practice?

We acknowledge that a cohorting approach may help to minimise the potential for unacceptable levels of cross-subsidy between members of a Retirement CDC scheme and help a scheme remain competitive. Careful thought will need to be given to the burden which cohorting would place on OPS trustees subject to Guided Retirement duties, since they would need to ensure that any Retirement CDC scheme used as a DPBS remains appropriate for their membership as cohorts change.

In our view, cohorting also adds a further layer of complexity from members’ perspective, which will add to the challenge faced by trustees in communicating and supporting members with their retirement options. As the DWP has acknowledged, it is essential that members fully understand the benefits that will be provided by the Retirement CDC scheme (see further our response to question 13 below).

It will be a challenge for trustees to explain how different cohorts will receive the same adjustment to benefits but might receive different actual increases. This may be most acute when the adjustment is negative, as set out in Figure 4 (paragraph 108 of the consultation). It might be the case that former colleagues from the same workforce retiring one year apart have different increases, with Cohort A receiving a real terms increase and Cohort B receiving a one-off cut to benefits. Even if this is actuarially fair, in practice it may lead to member complaints about unfair treatment if the former colleagues compare the benefits they are receiving (to the extent that the increase rates for different cohorts would not be available to members not in those cohorts). In our view, it is therefore important that transferring trustees are required to illustrate these risks and the possible treatment of benefits to prospective members of the Retirement CDC scheme before they are transferred without consent.

We query whether the proposed drafting at Annex B achieves the desired aim:

  • the definition of “cohort” appears unclear. The reference to a group of members who “receive the same adjustment” does not seem to us to be an effective way to define a cohort, since under regulation 40(4)(c), adjustments “must be applied to all the members of the scheme without variation”. This is again repeated in the section of the consultation on cohorting where it sets out “the principle that benefit adjustments should be applied to all members without variation” (paragraph 107 of the consultation). The current definition appears to result in all members being grouped within the same cohort. A different term should therefore be used to refer to members who have the same adjusted pension increase rate due to joining the scheme on the same actuarial terms for the initial level of income at a particular time
  • simply changing the definition of a cohort to a group of members who, in a given year, will receive the same “increase” to the rate or amount of benefit would not suffice either. This is because it could transpire that members in significantly different cohorts might end up with the same percentage increase, as CPI tends to fluctuate within a narrow band of 1-5%. As a result you could end up, for example, with a group of 65-year-olds receiving a 2% increase and also a group of 85-year-olds receiving the same 2% increase in a given year. In this example, while both groups are receiving the same percentage increase to the amount of their benefits, it is likely they would not be within the same cohort
  • it may be useful to include legislative protections around who determines the cohort “bandings” and on what basis, rather than leaving this purely to scheme rules. This would tie in with the proposed requirement for transfers-in to be on an actuarially equivalent basis (paragraph 90 of the consultation)
  • the first sub-regulation under draft regulation 40(4B) should be (a) rather than (f)
  • there seems to be a missing word at the end of draft regulation 40(4B)(a)(i)(aa). We assume it is meant to be an “or” between (aa) and (bb), and
  • draft regulation 40(4B)(a)(iv) refers to sub-regulation (4F), which appears to be an error as the regulation ends with (4E).

Question 12: Is there any further information that Retirement CDC schemes should be required to provide to new and prospective members?

The proposed information listed at paragraph 140 of the consultation appears to cover most key points, but we would expect:

  • the “target benefit level” to include full details of the benefit design, including target pension increases, death benefits and any other relevant benefits
  • members to be made aware of the scheme’s approach to cohorting, on what basis it is carried out (including how it is determined when one cohort is closed and another created) and who is responsible for making the relevant decisions in relation to cohorting, and
  • members may also find it useful to know the current size of the membership and assets of the scheme, given the impact that this may have on the scheme’s viability and performance and their benefits.

Question 13: Are there practical or operational challenges in delivering Retirement CDC communications through DC scheme trustees, and how might these be addressed?

 Yes, as mentioned in our general comments and question 5 above, trustees will be the “intermediaries” between members and Retirement CDC schemes.

It is not clear whose responsibility it is to ensure the accuracy of the information provided and where the liability lies if that information is not provided, is late or is inaccurate – will this lie with the OPS trustees or the Retirement CDC trustees?

As CDC will be a new concept for most members, and Retirement CDC will be a new type of scheme, we expect members to need higher levels of support initially to understand any Retirement CDC scheme used as a DPBS. This may reduce over time as CDC schemes become a more familiar part of the pensions landscape. It may be helpful if information about CDC schemes is advertised generally as part of the government’s introduction of the Guided Retirement framework.

In our view, clear and effective communications with members will be a key factor in promoting confidence in the Guided Retirement regime and managing risk for all parties involved. Trustees should be given as much clarity as possible as to the information and support they can provide to members, without falling foul of the marketing prohibition or breaching their fiduciary duty. A lack of clarity here can encourage a risk-averse approach to helping members with their retirement choices, and we appreciate the ongoing work and progress being made in this area. As the Guided Retirement and CDC regimes develop, joint guidance from the DWP and the FCA will be essential to ensure trustees understand the support that they are able to provide members within those boundaries.

Question 15: What charging structure/what charge levels is your organisation considering levying on members?  If implemented, at what level should a Retirement CDC charge cap be set?

From a legal perspective, we note that the DWP is considering introducing a charge cap for Retirement CDC. We expect that this safeguard would be an important factor for OPS trustees in assessing the appropriateness of Retirement CDC among other DPBS options. Most members of occupational DC schemes will be invested in the scheme’s default fund and subject to charge cap protections, and it could be difficult to justify moving members into an arrangement where that protection does not apply. While the lack of member “pots” in a CDC scheme may make measuring charges more challenging, we note that some form of cost control would be appropriate to protect members as we would expect that the operational costs of CDC could be higher than for standard DC schemes.

Question 18: Do you have any comments on the proposed amendment to Regulation 12 of the Preservation of Benefit Regulations 1991?

The proposed amendment appears to achieve the policy intention of enabling transfers of DC benefits from an OPS to an authorised CDC scheme without member consent (or, indeed a secondary transfer from an authorised CDC scheme to another authorised CDC scheme), on the same basis that transfers of DC benefits from an OPS can currently be made to an authorised master trust without member consent. This is necessary because the draft Guided Retirement legislation in the Pension Schemes Bill 2024/25 will not provide a statutory mechanism to allow trustees to make transfers to a DPBS without member consent[4] (see section 50(10) of the Bill).

As for master trusts, the proposed amendment is an enabling provision which does not override trustees’ other duties. Trustees’ decision to make a transfer without member consent can be summarised as a two-stage process: “can” the transfer be made, and “should” the transfer be made. The enabling provision addresses the first of these. A transfer may still be prevented by a range of different factors. For example, some tax protections can be lost on a transfer, such as protected pension age or protected tax-free cash, and this may mean that transferring trustees need to consider carefully whether the transfer should be made.

Transfers into master trusts will typically be carried out on a bulk basis, which can help overcome some of the tax considerations. For example, one of the conditions to retaining certain tax protections is that a transfer is a “block” transfer involving at least two members.

Unlike transfers to master trusts, we anticipate that, unless the transfer is being made from a scheme with a very large number of members where those members are being transferred to a Retirement CDC scheme regularly, transfers to a Retirement CDC scheme under the Guided Retirement framework might more typically be made on an individual basis as members reach retirement, and as such would not benefit from “block” transfer rules. This is another factor that trustees will need to consider as part of an already time- and resource-intensive transfer process.

Trustees would also need to ensure that members have been given sufficient opportunity to opt out of the bulk transfer under the Guided Retirement rules, so the timing of the transfer and member communications will be important. We expect this detail to be covered by regulations on Guided Retirement to be made under the Pension Schemes Bill 2024/25.

[1] Section 14A(5) and paragraph 23 of Schedule 1B to the Pension Schemes Act 2021 (as inserted by regulations 10 and 23 of the 2025 Regulations)

[2] Paragraph 5 of Schedule 1B to the Pension Schemes Act 2021 (as inserted by regulation 23 of the 2025 Regulations)

[3] PPI: Pension scheme assets – how they are invested and why they change over time

[4] Section 50(10) of the Pension Schemes Bill 2024/25 provides that nothing in the relevant chapter authorises any transfer in respect of a person’s accrued rights under a relevant scheme without that person’s consent