The government must put in place robust safeguards, high governance standards and clear alignment with wider decumulation reforms as it considers introducing retirement-only collective defined contribution (CDC) schemes, Pensions UK has urged.

In its response to the Department for Work and Pensions’ (DWP) consultation, the organisation set out its position on proposals that would allow people who have saved into a defined contribution (DC) scheme to transfer their pension pot into a CDC arrangement at retirement.

Pensions UK said retirement-only CDC could become a “valuable, scalable and trusted” part of the pension landscape, but only if governance expectations match those applied to whole-life CDC.

This includes strict fit-and-proper requirements, a clear separation of trustee duties, disciplined actuarial standards and transparent communication.

Without these safeguards, the body warned of material risks including “intergenerational unfairness, volatility, mispricing and member misunderstanding”.

It stressed that the model must operate within a regulatory framework that prevents unrealistic income projections or inappropriate marketing, calling for strong controls to avoid market distortions or mis-selling.

Communication was highlighted as a key concern, with members expected to join CDC at the point of retirement and make irreversible decisions.

Industry bodies have repeatedly warned that benefit illustrations for retirement-only CDC must be accurate and not misleading, and Pensions UK echoed this, stating that communications must be clear, timely and jargon-free, ensuring members understand that CDC income is not guaranteed and may fluctuate.

The organisation also emphasised the need for seamless integration with the government’s wider guided retirement reforms, the developing Value for Money framework and emerging default decumulation pathways.

Industry experts have argued that work on retirement CDC should be accelerated to ensure it dovetails with the forthcoming guided retirement duty.

To avoid inconsistent member journeys, Pensions UK argued that clear rules are needed on transfers, illustrations, quotation standards and alignment with Financial Conduct Authority (FCA) decumulation rules for contract-based schemes.

It also stressed that retirement-only CDC will require a high bar for authorisation and a fully developed regulatory environment, including evidence-based business plans that demonstrate how providers will reach the scale required to manage income variability and liquidity.

Commenting on the consultation, Pensions UK executive director of policy and advocacy, Zoe Alexander, said that CDC arrangements - whether whole-of-life or retirement only - have the potential to become a successful part of the workplace pension ecosystem alongside other solutions.

"But if they are to deliver on that promise, it is imperative that the right regulatory framework, authorisation regime and highest governance standards are in place to ensure savers get the best outcomes,” she added.

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