Govt publishes consequential and miscellaneous CDC amendment regulations

The government has published the consequential and miscellaneous amendments to existing pensions legislation in relation to collective defined contribution (CDC) pensions.

The statutory instrument is subject to negative resolution procedure and does not amend primary legislation.

In an explanatory memorandum laid before parliament, the Department for Work and Pensions (DWP) outlined the amendments that would be applied to existing legislation.

These include amendments to the disclosure and publication requirements in the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013, which aims to ensure greater transparency and understanding about the nature and operation of CDC schemes.

Members will be required to be informed that their pension benefits may be adjusted on an annual basis on a CDC scheme, while a framework for disclosing other important information about the operation of CDC schemes to members and prospective members will need to be provided under the amendments.

Furthermore, CDC schemes will be exempt from certain existing legislative provisions that are “inappropriate”, for example employer debt requirements in section 75 of the Pensions Act 1995.

Amendments have also been made to the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991, whereby bulk transfers without member consent from defined benefit schemes to CDC schemes will not be permitted, as it may be to the detriment of members.

The statutory instrument also makes provisions relating to the winding up of CDC schemes, including the amendment that members will be prevented seeking to transfer out of a CDC scheme that is being wound up.

Further amendments to the Transfer Values Regulations relate to a member’s right to transfer out of CDC scheme. They include providing that the calculation of the member’s share of the collective assets, which are due to be transferred out of the scheme, must be calculated in accordance with scheme rules and legislation and with the input of an actuary.

CDC members will also need to be signposted to the Money and Pensions Service guidance services if they are seeking a transfer, among a series of other amendments ensuring that CDC schemes are treated appropriately.

The amendments come following the government’s confirmation that draft legislation for CDC schemes will come into force from 1 August 2022.

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