DWP consults on extending the CDC regime to unconnected employers

Following the launch of the UK’s first collective defined contribution pension scheme by Royal Mail on October 7, 2024, the DWP published a consultation paper and draft legislation to extend the collective defined contribution framework to non-associated multi-employer schemes on October 8, 2024. The consultation period runs until November 19, 2024.

Currently, the CDC regime covers only single or connected employers and the intention is to expand the framework to cover schemes with multiple unconnected employers. 

The Pension Schemes Act 2021 includes powers to extend the existing CDC regime, and the changes can therefore be largely introduced under the draft regulations in the consultation. 

Views are sought on provisions removing the current exclusion of unconnected multiple employer schemes from operating under the existing CDC framework.  The draft regulations also set out what CDC schemes that are whole-life unconnected multiple employer schemes need to do to become authorised and to operate effectively under regulatory oversight. The definition of “connected” employers is to be aligned with the current definition applying to the master trust regime.

The DWP's consultation has been generally welcomed with many claiming it will benefit employers, pension savers and the UK economy. The government intends to introduce legislation in 2025 and, subject to Parliamentary approval, will bring it into force as soon as practicable after that. The Regulator will also update its CDC code of practice.