The biggest attraction of collective defined contribution (CDC) pension schemes is their potential to improve retirement outcomes and the member experience without increasing employers’ pension spending, according to LCP.

Its survey found that 29 per cent of pension professionals were most excited about CDC’s ability to improve retirement outcomes without increasing pension spend, while a further 25 per cent cited its potential to improve the retirement experience for DC members.

Almost a quarter (24 per cent) pointed to the launch of retirement CDC as the most exciting development, while 17 per cent highlighted the launch of whole-of-life CDC schemes, and 3 per cent cited CDC as a potential use of defined benefit pension surplus.

When asked about what would encourage organisations to engage more actively with CDC, 41 per cent said they wanted to hear more from those designing commercial CDC products.

Nearly a quarter (24 per cent) wanted more guidance from the government and regulators, 16 per cent said greater familiarity with UK CDC benefit design would help, 14 per cent wanted more examples from early adopters, and 6 per cent indicated a clearer regulatory deadline would be most beneficial.

LCP urged organisations considering CDC pensions to review their existing pension strategies and assess whether members’ retirement needs are being met; understand potential CDC outcomes and compare them with existing pension arrangements; decide whether CDC was right for members; determine which type of CDC arrangement would be most appropriate; and implement a new future proofed pensions and decumulation strategy.

“What stands out from the polls is that sponsors and trustees are laser focused on outcomes,” said LCP partner, Steven Taylor.

“The greatest interest in CDC comes from its potential to improve both incomes and member experience through retirement without requiring higher contributions.”

LCP partner, Sam Cobley, added: “The strong interest in offering retirement CDC solutions was an input into the decision for Guided Retirement regulations to be delayed.

“The delay allows time for providers to robustly design decumulation CDC solutions in response to a growing awareness it would be valuable in providing some member cohorts with a stable, inflation linked income solution.”

---