A new type of pension is now open for applications; Collective Defined Contribution pension schemes, or CDCs for short, and will offer an alternative to the UK’s two primary pension scheme models, Defined Contribution (DC) and Defined Benefit (DB). Collective Defined Contribution (CDC) is a new type of employee retirement provision where employers pay a fixed rate of contributions into the scheme and members are paid pensions with variable increase.
CDCs have the potential to provide improved retirement returns for savers, with more predictable. fixed costs for employers. Both employers and employees contribute to a collective fund from which individual retirement incomes are drawn, with trustees responsible for oversight to ensure schemes are viable and can meet their legal requirements and commitments to members.
This new scheme was passed due to the landmark Pension Schemes Act 2021. They could provide clearer outcomes for savers and the CDC has the potential to provide new and better approaches for benefit provision. These schemes have had a positive effect in other countries and could provide better returns for retirement if run well and well designed.