The UK government is set to announce new regulations allowing for the expansion of collective defined contribution (CDC) pension schemes.
CDC schemes allow employers to pool multiple pension schemes into a collective fund, which the government said gives workers regular pension payments for life, more security and higher average incomes throughout retirement when compared with individual pension pots.
In a statement, the government said millions of people across the UK could see their pension savings increase by up to 60% as a result of the planned changes.
Currently, the only CDC scheme in the UK is the Royal Mail Collective Pension Plan, which now has over 100,000 members.
The shift towards more CDCs comes as part of a package of reforms by the UK government to boost British people’s retirement savings, amid concerns that millions of people are not saving enough to last through later life.
The government is also looking to use pension savings to invest in UK infrastructure to boost the economy, which pooling funds through CDC schemes could help to do.
The UK’s minister for pensions, Torsten Bell, said: “Collective pensions offer a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.
“By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last and they can enjoy their retirement.”
Mr Bell will deliver a speech later today to hundreds of employers where he will set out the benefits of CDC schemes and the next steps towards implementing them.
Steven Taylor, partner at consultancy LCP and head of CDC, told International Adviser: “Today’s developments have been eagerly awaited by many in the pensions industry, who are keen to progress plans to offer CDC to a wider population.
“This will enable smaller and medium-sized employers to join CDC arrangements, and their employees to benefit from the much higher expected outcomes and income in retirement that CDC brings.”
