TPR launches CDC code of practice consultation

The Pensions Regulator (TPR) has launched a consultation on the code of practice for the authorisation and supervision of collective defined contribution (CDC) pension schemes.

It has published a draft code of practice that details how an application for authorisation must be made and the matters the regulator will take into account when considering applications.

The draft code outlines the information TPR expects to use for its assessment of applying CDC schemes and the standards it expects from applicants.

Applications will be able to be made from August 2022.

TPR intends to incorporate the CDC code into its single code of practice, with the CDC code therefore adopting the same modular format as the single code of practice.

To operate in the UK, CDC schemes will need to be authorised by TPR through meeting all the authorisation criteria and will be continually supervised against the criteria once they are operating.

These criteria consist of fitness and propriety, systems and processes, member communications, continuity strategy, financial sustainability, and sound scheme design.

In its consultation, TPR is seeking industry views on whether any important areas of authorisation criteria have been missed in the draft code, whether the level of detail is appropriate and whether there are any areas where supporting guidance would be useful.

CDC schemes were introduced by the Pension Schemes Act last year and the government confirmed that draft legislation will come into force from August 2022 last month (December).

Commenting on the draft code and consultation, TPR executive director of regulatory policy, David Fairs, said: “CDC schemes have the potential to change the pensions landscape by offering savers and employers a viable alternative to traditional defined benefit and defined contribution schemes.

“As a regulator we welcome innovation but we remain committed to protecting savers. We are confident our draft code sets the right bar for authorising and supervising CDC pension schemes that have demonstrated how they meet the criteria.

“The draft code focuses on requirements that employers and trustees considering establishing a CDC scheme need to plan for now. We will be revisiting the code to expand on our expectations for the closure or wind up of a scheme in due course. We will also be producing accompanying guidance.

“While initially CDC schemes will be limited to those set up by single employers, or two or more connected employers, the Pension Schemes Act 2021 contains powers to enable further developments of the CDC market, such as multi-employer schemes. We look forward to working with the DWP and industry on any development and expansion of CDC schemes.”

Pensions Minister, Guy Opperman, added: “I welcome this consultation from TPR, which brings us another step closer to making CDC pension schemes a reality in Great Britain.

“We have seen the positive effect of these schemes in other countries and it is abundantly clear that when they are well-designed and well-run, CDC schemes have the potential to provide a positive outcome for savers, and can be resilient to market shocks.”

The consultation will run until 22 March.

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