On 06 November the Department for Work and Pensions launched a consultation to shape legislation for collective defined contribution (CDC) schemes, which in contrast with individual defined benefit schemes (fixed pension amounts) and defined contribution schemes (fixed individual pension contributions), aim to deliver ‘ambition’ or ‘target’ pension amounts that can vary over time. With CDC schemes employees contribute collectively into a scheme that targets a payout level called an ‘ambition’ amount but this amount is not guaranteed and can vary over time. The government is looking to quickly shape legislation that will enable the Royal Mail in set up the first CDC type pension scheme in the kingdom. Royal Mail has been calling for months for the implementation of a CDC scheme for its 141,000 employees and if successful will become the first company to practice this type of pensions provision scheme.
Announcing the launch of the consultation for this new form of pension scheme, Pensions Minister Guy Opperman claimed, “CDC pension schemes are an important innovation which will provide more choice and flexibility for pension scheme members and employers.” This isn’t the first time the UK has considered the CDC scheme but in contrast with the previous lack of corporate enthusiasm, this time round the Royal Mail company is fully backing the initiative.
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