The Pensions Regulator (TPR) has today launched a consultation on a new code of practice for the authorisation and supervision of collective defined contribution (CDC) pension schemes in the UK.
The eight-week consultation will run until Tuesday 22 March, with the regulator seeking feedback on a draft code which reflects regulations for CDC schemes laid before parliament last month.
The final code of practice will outline how trustees can apply for authorisation, and how TPR will assess schemes against authorisation criteria at the initial application stage and throughout ongoing supervision.
CDC pension schemes allow employees to pool their money into a single fund which pays annual pension income, offering savers and employers a viable alternative to traditional defined benefit and defined contribution schemes.
“We are confident our draft code sets the right bar for authorising and supervising CDC pension schemes that have demonstrated how they meet the criteria,” said David Fairs, TPR’s executive director of regulatory policy.
“The draft code focuses on requirements that employers and trustees considering establishing a CDC scheme need to plan for now. We will be revisiting the code to expand on our expectations for the closure or wind up of a scheme in due course. We will also be producing accompanying guidance.”
Trustees will be able to apply for authorisation to operate a CDC scheme from August this year, with the Pension Schemes Act 2021 introducing an authorisation and supervision regime to ensure only schemes that are well run and built on sound foundations can operate.
Fairs continued: “While initially CDC schemes will be limited to those set up by single employers, or two or more connected employers, the Pension Schemes Act 2021 contains powers to enable further developments of the CDC market, such as multi-employer schemes.
“We look forward to working with the Department for Work and Pensions and industry on any development and expansion of CDC schemes.”
This comes after a report published last week by the Work and Pensions Committee urged the government to continue to support the development of CDC schemes.
Reacting to the report's publication, IFoA pensions board chair, Leah Evans, said: “CDC schemes are a potential innovation for pension savers and this report is a further welcome step in developing practical, innovative schemes for willing employers in the UK.
“The committee’s inquiry continues to shine a light on the challenges that exist for the modern pension saver and to offer solutions. We look forward to continuing this debate and the consideration of issues like the viability of multi-employer CDC schemes.”
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Author: Chris Seekings