Retirement collective defined contribution (CDC) schemes will be the “best solution” for between 70-90 per cent of members, WTW managing director, Edd Collins, has argued.

Speaking at the Pensions UK Investment Conference in Edinburgh today, 11 March, Collins said that CDC may not be the best for everyone but he “firmly believes” that it is the best default solution for at-retirement.

The session followed earlier confirmation from Pensions Minister, Torsten Bell, that legislation to enable retirement CDC will be brought forward later this year, with Department for Work and Pensions retirement CDC pensions policy lead, Bryony Halliday, confirming that this would be in August.

It follows the October 2025 consultation launched by the Department for Work and Pensions (DWP) on the design and regulatory framework for such schemes.

WTW senior director, Keith McInally, highlighted some of the benefits of retirement CDC, such as their investment in growth assets, which would include a “meaningful allocation to private markets”.

He said: “This has a big benefit because this is when the pot is at its largest and the higher expected returns have the biggest impact.

“It also has a knock-on effect pre-retirement as well, because instead of having to de-risk as you approach retirement if you’re purchasing an annuity to manage risks, if your retirement solution starts off with a high allocation to growth assets, you can legitimately keep holding these growth assets in the accumulation phase right through to retirement.

“That in itself has about a 15 per cent impact in outcome versus an annuity purchase.”

Furthermore, compared to the flex-and-fix approach, where people begin with drawdown and transition to an annuity later on, he explained that retirement CDC can hold growth assets much longer in retirement.

“Even at age 85, 20 years after the retirement date, a retirement CDC scheme might still allocate around 50 per cent of the assets in respect of that member’s growth,” he said.

He added that CDC schemes are priced based on best estimate assumptions for investment returns.

Members, he said, would get conversion terms at retirement that reflect the best estimate, allowing for the full glidepath in retirement.

When it comes to risk in retirement CDC schemes, McInally explained that it sits within the pension increase adjustment. Each year, for example, the pension increase that the member receives is variable and could go up or down based on the performance of the collective investment pool.

Halliday then provided an overview of the path to retirement CDC following the department’s consultation, which received 56 responses.

“The biggest area that came through amongst all of the responses is the need for clear, timely member communications, so that members can understand what it is they’re entering into,” she said.

Halliday also stated that policy work is taking place on access to the schemes, and she envisages it sitting within guided retirement.

“We’re thinking about when are the appropriate moments for members to be told about retirement CDC schemes, whether that is through the wake-up pack, or earlier than that, so that members, even though we’re seeing this within guided retirement, it’s something that members don’t have to make a decision about, that they have the information there if they want to make a decision about it earlier,” she said.

In addition, she said the flexibility of such schemes was flagged in the consultation, so the DWP has been investigating cooling-off periods, which would be similar to annuity cooling-off periods.

Once the policy work is complete, draft legislation will be brought forward and consulted on. Following this, there will be a parliamentary process, as regulations for retirement CDC will amend the Pension Schemes Act 2021.

She said: “After which time, The Pensions Regulator (TPR) would update their code of practise and then the legislation and code of practice would be enforced.

“On that date, as will be the case on the 3 August this year, TPR will be accepting applications for prospective retirement CDC schemes. They’ve got six months to decide to approve or reject applications, and then schemes will be operational.”

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