Pensions Minister, Torsten Bell, has confirmed that the government is moving forward with its plans to extend collective defined contribution (CDC) to multi-employer schemes, with legislation set to be laid in parliament in the autumn.

Speaking at a LCP conference, Bell confirmed that there are "several organisations" now looking at setting up multi-employer CDC, and that the government is looking to support that with the introduction of legislation this autumn.

He also emphasised that the government is hoping to make "swift progress in that regard", with hopes that schemes will be able to come forward for authorisation as early as 2026.

Sharing the announcement, the Department for Work and Pensions (DWP) suggested that a lack of innovation and reform of the DC savings landscape risks some future pensioners bearing large risks, in terms of the value of their investments and whether their savings will provide an income throughout their retirement.

However, it argued that CDC could help boost saver returns, with modelling from the Pensions Policy Institute (PPI) suggesting that single employer CDCs could deliver a significantly greater average replacement rate (47 per cent) than currently delivered through annuities (40 per cent) with even higher benefits seen for multi-employer CDCs as longevity risks are pooled (69 per cent).

The DWP said that, due to their size, CDCs can also be a more efficient vehicle for economic growth, with similar collective funds in Canada and Australia having proved an efficient way of supporting economic growth, investing in a wider range of sectors and assets.

Given this, the "wide-reaching" reforms are intended to make CDC pension schemes more commonplace, in turn reducing risk and volatility for savers, as well as supporting the government's growth agenda and providing employers with greater freedoms.

The government previously confirmed plans to extend CDC regulations to allow for multiple employer CDC schemes to be established, in what was branded a "landmark moment" by industry experts.

Commenting on the latest update, Bell stated: “Success in the world of pensions isn’t just about getting people saving, it’s ensuring their savings work as hard as possible for them.

“Making sure more employers and savers have the option of an innovative CDC pension scheme is an important part of making that happen.

“Too often at present we are leaving individuals to face significant risks, about how their individual investments perform and how long their retirements last. Pooling some of those risks will drive higher incomes for pensioners and greater investments in productive assets across the economy.”

The Minister also confirmed his desire to deliver decumulation only CDC schemes, which would allow certain savers with DC schemes to access CDCs, offering retirees the chance to buy longer term, pooled retirement products that deliver stability for pensioners.

"There is a good case, obviously, for allowing another option on the decumulation menu, through decumulation CDC... that is obviously a bit trickier on the policy side, but that work is now well underway.

"We'll get the details right and we'll be going to talk to all of you to draw from your experience as we finalise those plans."

The announcement is also intended to provide further clarity to the industry ahead of the upcoming Pensions Investment Review and Pension Schemes Bill.

Indeed, the minister provided some further updates on the timing for this work, confirming that the government will finalise phase one of the review "in the coming weeks", with the Pension Schemes Bill to be introduced before the summer recess.

He stated: "We'll finalise phase one of the pension for you in the next few weeks and look forward to talking to lots of you about that. We'll introduce the Pension Schemes Bill by this summer.

"And then will be the right time to launch the second phase of the pensions review focused on wider questions of adequacy, and I want to encourage everyone to think about adequacy in broad terms.

"Average rates for the whole population are not massively useful for us in terms of policy making in this regard, and we also need to make sure we don't just think about pensions in isolation."

Bell also hit back at the claims that phase two of the review has been delayed, confirming that he will come forward in "short order" with the timeline for phase two of the pension review.

"But I'm not interested in people just saying to me, I would like some more savings to manage..." he added. "We've got to address the bigger questions about the system first... So I'm not really apologetic for doing it in this order."

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