CDC pensions

Hi, I am Andy O'Regan, the Chief Client Strategy Officer at TPT.

Today I want to talk to you about a game changer for the pensions industry that's Collective Defined Contribution or CDC pension schemes.

You may be aware that Royal Mail launched the first CDC scheme in October, 2024.

This new type of pension arrangement is designed to combine the best features of traditional defined benefit and defined contribution plans, offering tangible benefits to both employers and pension scheme members.

The government has consulted on regulations which will make CDC available to any employer of any size in a cost effective way.

TPT is now actively exploring the development of a CDC scheme.

We are opening up our diaries from January, 2025 to have initial conversations with interested employers.

These meetings are designed to capture valuable feedback from you and help us to shape our offering by taking 30 minutes to have a conversation with us.

You'll get early insight into the CDC framework and its advantages.

CDC schemes combine the best features of traditional pension arrangements, an income in retirement for the pension scheme members, similar to defined benefit and the predictability in contributions for the employers similar to defined contribution schemes by pooling risks.

It is expected that CDC schemes can deliver better outcomes for pension scheme members than DC without increasing the cost for employers.

Please book a 30 minute meeting with us to discuss how CDC can benefit your organisation and your workforce.

We look forward to the opportunity to discuss CDC with you and how we can make pension schemes perform better for everyone.

Many thanks for your time and look forward to speaking to you soon.

Introduction

Hello and welcome to the latest Professional Pensions webinar on the next steps for multi-employer CDC. This discussion is held in association with BlackRock and TPT Retirement Solutions.

Late last year, the government finalised the regulatory framework to enable whole-of-life multi-employer CDC schemes, allowing CDC to expand beyond single or connected employers. Legislation is expected to come into force on 31 July, with applications opening shortly after.

The first multi-employer CDC schemes could be up and running in 2027. This webinar explores how CDC will work in practice, the outcomes it could deliver, and the benefits for both employers and members. It also covers governance, investment opportunities and lessons from international markets.

00:03:36 – Introductions

Matthew Delaney (BlackRock)
Managing Director within BlackRock’s institutional business, focusing on developing pension solutions in response to regulatory change, including CDC.

Paul Eagles (TPT Retirement Solutions)
Head of CDC activity, focused on bringing a multi-employer CDC scheme to market, targeting launch in 2027.

Chintan Gandhi (Aon)
Partner and Head of CDC, working with employers, trustees and providers to shape CDC strategies.

Joanna Sharples (Aon)
Responsible for investment strategies, including default investment approaches and how they apply to CDC.

00:04:20 – What is CDC and how does it work?

CDC (Collective Defined Contribution) aims to provide a target income in retirement—an income for life generated from pooled contributions and investment returns.

Members do not need to make complex retirement decisions. Instead, pensions are adjusted annually based on:

• Investment performance
• Inflation
• Life expectancy

In most cases, pensions are expected to increase over time, although reductions may occur in extreme market conditions.

00:06:06 – International experience and key learnings

CDC has been widely used across Europe for decades. The UK model has incorporated several key lessons:

• A DC-based framework with no ongoing employer liability
• Minimising cross-subsidies between employers and members
• Annual valuations to avoid surplus or deficit build-up

00:08:18 – Benefits of CDC

For members:

• Income for life (reduced risk of running out of money)
• No need to make complex financial decisions at retirement

For employers:

• Fixed contribution costs
• No additional liabilities
• Stronger employee value proposition for attraction and retention

CDC is expected to deliver improved outcomes compared to traditional DC, driven by long-term investment and risk pooling.

00:10:45 – Key challenges

The main challenge is education and understanding.

Employers and members need to understand:

• How CDC differs from DC and DB
• That outcomes are target-based, not guaranteed

Communication is critical, particularly at the early stages.

00:12:29 – Early evidence and proof points

The Royal Mail CDC scheme provides an early UK example. Its first valuation delivered a positive benefit adjustment, helping to demonstrate that CDC can work in practice and build confidence in the model.

00:13:15 – Managing risk and pension adjustments

Pension reductions can occur, but typically:

• They are smaller than wider market declines
• They happen during broader economic downturns

In most years, outcomes are expected to be:

• Slightly above inflation, or
• Below inflation, rather than outright cuts

Clear upfront communication is essential to set expectations.

00:16:00 – Employer adoption

CDC is gaining interest due to:

• Lack of future employer liability
• Potential for better retirement outcomes
• Simpler member journey

Employers across sectors are already exploring adoption, with early movers helping to build market momentum.

00:18:00 – Implementation journey

Typical implementation includes:

1. Internal governance approval
2. Regulatory authorisation
3. Employer onboarding (2–3 months)
4. Member communications and setup
5. Transition and asset transfer

00:20:12 – Investment strategy

CDC schemes enable:

• Longer-term investment horizons
• Greater allocation to growth assets (e.g. equities, private markets)
• Reduced need for daily pricing and liquidity constraints

Over time, portfolios evolve to include more defensive assets as members enter retirement.

00:27:18 – Governance considerations

Key governance priorities include:

• Fair treatment of all members
• Strong actuarial oversight
• Clear risk management frameworks
• Monitoring the impact of new employers joining

Governance structures must support scalability and consistency.

00:32:14 – TPT approach

TPT is developing a multi-employer CDC scheme targeting:

• Launch around 2027
• Improved member outcomes
• Reduced reliance on individual decision-making

Employer demand and engagement are key drivers behind the initiative.

00:34:15 – Costs vs DC

CDC operates within the same charge cap framework as DC schemes (0.75%).

While cost structures are similar, the focus shifts toward value delivered, particularly in terms of retirement income.

00:39:39 – CDC vs DC master trusts

CDC is expected to complement, not replace, DC.

Potential model:

• CDC for core retirement income
• DC for flexibility and additional contributions

This creates a more balanced approach for members.

00:50:11 – Retirement CDC

Retirement-only CDC is expected to be introduced through upcoming regulation.

It allows members to:

• Convert DC savings into an income for life
• Avoid complex decisions in retirement
• Target income that keeps pace with inflation

This aligns with the move toward guided retirement solutions.

00:54:33 – Final takeaways

• CDC has the potential to improve member outcomes without increasing employer costs
• Early adopters will drive market confidence
• Strong governance, communication and delivery will be critical
• Over time, CDC could become a mainstream part of UK pensions

I think CDC is actually one of the more exciting innovations I've seen in my career. I think looking at it, we've touched on member outcomes as being a key driver for it, which on its own is enough. But alongside that, you have no additional boundary risk for the sponsor. You actually reduce the burden of decision making on the member.

And as we talk about long term assets, it's a line of the Government's productive finance initiative. And so to me, this is something which is being designed in the place of knowledge underlying to so many things that you need in pensions. I think the big opportunity for an employer is to improve the outcomes. There's a lot of employers can't really afford to increase their contribution levels.

It's very expensive to do so, particularly for large employers. So if I can offer my board increasing member outcomes for the same cost, it's almost a no brainer, especially to change the dial. I would say be open minded. There are so many options as innovation, and we want to create a market where there is choice, and if we pre-empt or discount anything, then I think we're not taking advantage of the opportunity we have today that could greatly benefit members.

And so my thing would be open minded. The only way we actually improve and create change is by embracing innovation. There's a lot of engagement and I think doing continuing to do things like this will really, really help because what we're looking for is to, submit a scheme for authorisation this year and launch a Multi-Employer CDC scheme next year, which is really exciting, really innovative.

But we're seeing the demand for it. There's a lot of employers want to talk to us about it. This is really exciting time for the pensions sector at the moment.