The legislation has been laid before Parliament and is planned to come into force on 31 July 2026 together with an updated code of practice from The Pensions Regulator (which will be consulted on).
It is termed by Torsten Bell, minister for pensions, (in the newly published consultation2 on Retirement CDC pension schemes) as "the culmination of phase 2" of CDC development.
Background
Phase 1 in the development of a CDC framework, covered single and connected employer CDC schemes culminating with the launch, in October 2024, of the Royal Mail Collective Pension Plan.
Phase 3 will allow DC pension savers to transfer into a collective fund at retirement (i.e. CDC in decumulation rather than whole-life accumulation and decumulation) that would provide them with "a trustee managed income for life, adjusted annually based on investment performance and scheme sustainability." This consultation closes on 4 December 2025 and has 18 questions.
There is also an intention to amend existing legislation in order that trustees may make bulk transfers, without consent, to authorised CDC schemes (along the same lines as bulk transfers to authorised master trusts).
Unconnected multiple employer CDC schemes
The amended final regulations, once they come into force, will expand the scope of CDC. However, the consultation outcome clarifies the policy intention to have two separate CDC authorisation frameworks in addition to the existing master trust authorisation framework. Schemes will not be able to switch between the single or connected CDC authorisation regime and the unconnected multiple employer CDC authorisation regime. Likewise, an existing authorised master trust would have to apply for authorisation of a CDC section under the separate framework.
The consultation outcome contains details of the number of received responses to each question raised in the original consultation, and whether the response was positive or negative and how the DWP changed, or didn't change, the draft regulations in light of this. In some cases, further review of the draft regulations has led to revisions that were not raised in the original consultation.
Next steps
The impact assessment document3 published at the same time, assumes that around five CDC schemes will enter the market over the next 10 years. It is expected that it will be existing master trusts (of which there are currently 33 and an expectation that this will reduce to around 15 to 20) that will choose to apply for authorisation of a CDC scheme.
The likelihood is that master trusts offering CDC schemes will encourage further market consolidation as smaller schemes may leave the market and not have the scale to operate.
A CDC scheme that is granted authorisation by The Pensions Regulator will have 24 months from the date on which the Regulator received the application to begin operating. Otherwise, authorisation will be automatically withdrawn (unless the Regulator is satisfied the trustees have good reason for needing a six-week extension). Assuming the first applications are made next summer, the first unconnected multiple employer CDC schemes will be established in 2028.
