One in eight organisations keen on CDC adoption

Around one in eight companies have said they will adopt a Collective Defined Contribution (CDC) pension scheme of some sort by 2025, a survey from Willis Towers Watson (WTW) has found.

In a poll of 70 organisations, 13 per cent said that it was “very likely” or “likely” they would provide CDC benefits within the next six years, after the government gave it the green light last month.

According to WTW, those most likely to provide collective benefits are firms which have both defined benefit and defined contribution pension plans in place, suggesting that not just those with a DB arrangement in place, such as Royal Mail, will be interested in the initiative.

WTW Retirement senior director, Simon Eagle, said: “New things usually take time to catch on. While only a minority of organisations are expecting to be part of the first wave of CDC benefit provision, our data shows that most organisations would like to provide their employees with a regular income in retirement rather than a flexible pensions pot.

“This suggests there may be further appetite for CDC provision in the longer term.”

Furthermore, the survey found that 34 per cent participants said their members would struggle to understand the nature of CDC.

In the government’s response to the consultation, it highlighted the need for schemes to “have a robust member communication strategy”.

Legislation for CDC is likely to be included in a bumper pensions bill, expected towards the end of the year.

The initiative has been spearheaded by the Royal Mail, backed by the Communication Workers Union (CWU), after it drew up the plans for its 140,000 employees, based on the “world leading” pension systems in the Netherlands and Denmark.

Once it has ironed out any issues with the Royal Mail trial, it will look to expand CDCs to master trusts and multi-employer pension schemes.

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