Trade union Unison has called for caution over collective defined contribution (CDC) schemes, warning that the scheme type should not be used to replace ‘viable’ defined benefit (DB) schemes.

In an update, the union stated that it saw DB schemes as vital in providing decent pensions for many public service workers.

It acknowledged, however, that millions of public service workers were not eligible to join DB schemes, and are therefore dependent on defined contribution (DC) schemes.

Unison added that it had negotiated with employers in these sectors and had “successfully brought about a number of relatively high-quality DC schemes for members” in recent years.

Unison head of pensions, Glyn Jenkins, said that caution was needed when employers considered any changes to existing pension arrangements.

He stated that the introduction of CDC schemes “must not erode current provision”.

“Unison supports improving member outcomes through the introduction of CDC for members in DC schemes, but the new schemes should not be used to replace viable defined benefit schemes,” he continued.

According to Jenkins, many DC schemes will not provide an adequate income for their members, describing contribution levels, especially from employers, and “woefully inadequate”.

“CDC schemes should improve the position for members in DC schemes,” he stated.

“Even though such schemes do not guarantee benefit levels, they do set a target benefit level that may be reached.”

Applications for CDC schemes opened on 1 August 2022, following the introduction of legislation in the Pension Schemes Act 2021.

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