Legislation will of course be needed in order for the new collective defined contribution pension scheme to become effective, but on 18 March 2019 the UK Government officially announced in its response to the consultation on the issue that it would indeed legislate in order to introduce the new collective defined contribution pension scheme, or CDC. According to the Department for Work and Pensions, the CDC scheme that draws on the system already in operation in the Netherlands (c.f. article No. 10887) could result in better pension benefits for millions. Royal Mail, the catalyst behind the pension scheme development, will be the first employer to use the new scheme and several other companies have also shown serious interest.
As a reminder, the CDC intends for employee contributions to be pooled in order to reduce costs and improve final returns. With a CDC scheme employer contributions are generally fixed although they can be altered in line with the market, and employers are not liable for the final pension payment outcomes. In addition the CDC system does not guarantee final pension amounts, instead these schemes will set an objective from the outset. The Department for Work and Pensions stated, “The benefits of
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