Aon has announced its intention to introduce a whole-of-life multi-employer collective defined contribution (CDC) section into its DC master trust from 2028.

The CDC section will sit alongside DC benefits within the Aon MasterTrust, subject to regulatory approval.

Employers utilising the offering will be able to default their workers’ contributions into a whole-of-life CDC section within the master trust, which aims to build an income for life in retirement that keeps pace with the cost of living.

Alternatively, employees can be defaulted into a DC section of the master trust, where they accumulate their pension pot individually, or be offered a combination of both DC and CDC.

Aon said this combined offering would include giving employees the opportunity to make a selection based on their own preferences, including paying in additional voluntary contributions to either or both sections.

The provider is also exploring the future introduction of a retirement CDC section within its master trust once regulations are in place.

“Aon was involved throughout the process that brought this new type of pension scheme into existence, so we are particularly excited to announce our intention to launch a whole-life CDC section within The Aon MasterTrust,” said Aon head of EMEA wealth solutions, Michael Clare.

“CDC is an innovation that helps address the evolving needs of our clients and their employees. Offered alongside DC, it ensures we are introducing CDC in a way that caters effectively for the differing needs of our individual clients and their workforces.

“As we also continue to explore the future introduction of retirement CDC within The Aon MasterTrust, we eagerly await the initial draft retirement CDC regulations which are expected this autumn.”

Aon partner and head of CDC, Chintan Gandhi, said whole-of-life CDC pensions provide a powerful tool to attract, reward, retain and retire employees on time, which strengthen the employee value proposition in competitive labour markets.

“We believe that CDC could revolutionise pensions in the UK, creating value for both employees and employers,” Gandhi added.

“We are now looking to continue our engagement with a wide range of employers, sectors and unions in the UK, including seeking feedback to help shape our plans for CDC.”

Aon chief investment officer, DC solutions, Jo Sharples, noted that collective investment and long-term horizons enabled CDC schemes to remain invested in growth assets up to and through retirement.

“CDC schemes can therefore invest more productively and support responsible, sustainable outcomes – helping to deliver the kind of world current and future generations want to retire into,” Sharples concluded.

The Pensions Regulator (TPR) began accepting applications for multi-employer CDC schemes on 31 July.

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