Collective Defined Contribution

Collective Defined Contribution

The concept of Collective Defined Contribution (CDC) provision is simple: contributions into such schemes are pooled and invested with a view to delivering a target benefit level.  

CDC is an interesting innovation in the UK pensions market and has some potential as a complement to DB and DC schemes in specific circumstances, such as where employers do not wish to continue offering a DB scheme but would prefer not to opt for individual DC arrangements.  The PLSA supports the Government’s desire to facilitate innovation in order to improve retirement outcomes for savers. 

However, it is important to recognise that CDC entails some significant challenges, particularly in regard to the communication of benefits to members, complex governance decisions for trustees, and high running costs that are likely to make it suitable only for larger schemes.