The Pension Schemes Act 2021 introduces a framework for a new type of pension scheme – collective money purchase schemes. Also known as collective defined contribution or CDC schemes, this type of pension scheme offers a middle path between traditional defined benefit (DB) and defined contribution (DC) schemes.

Employer and member contributions are fixed, as in a DC scheme. However, investment and longevity risks are borne collectively by the members, rather than being borne exclusively by the employer (as in a DB scheme) or exclusively by the individual member (as in a DC scheme). Members are promised a target retirement income, but this can be adjusted up or down to reflect the scheme’s investment performance and other risks as longevity experience.

The government is currently consulting on draft regulations setting out further detail of the legal framework for CDC schemes. The consultation closes on 31 August.


Continue Reading A third way – collective money purchase pension schemes

DC consolidation has been on the Government’s agenda for some time. Now the DWP has published a call for evidence, suggesting that the push to consolidate will be ramped up.

Consolidation involves winding up small DC arrangements and moving active members and accrued DC pots to larger schemes. Typically the chosen destination will be a master trust – a multi-employer occupational pension scheme which operates on a commercial basis. Master trusts are subject to an authorisation and supervision regime run by the Pensions Regulator.


Continue Reading DC consolidation: large is beautiful?

In March 2021 the Financial Conduct Authority (“FCA”) produced an updated joint guide for employers and trustees on providing financial support to employees and members. The guidance is an updated version of a document published in October 2020. The updated guidance will be particularly useful for employers that provide in-house pensions administration services.

Continue Reading Supporting employees with financial matters

The Pensions Regulator issued a suite of COVID-19 guidance for trustees and employers at the end of March. As part of that guidance, the Regulator announced that it would be taking a more flexible approach to regulation and enforcement in certain areas for a limited period. Over the intervening months, this flexibility has largely been removed now that schemes have come through the initial disruption and adjusted to new ways of working. Many employers, however, are still experiencing difficult times.

Continue Reading The Pensions Regulator’s COVID-19 guidance – where are we now?

For a few years now, the Government has been considering ways to enhance the security and sustainability of pensions in the UK, and to protect defined benefit (“DB“) pension schemes. These considerations were documented in the Pension Schemes Bill. Due to lack of Parliamentary time (aka a little thing called Brexit and the general election), the Bill was put on hold but remained very much on everyone’s minds. The Committee Stage in Parliament began last week, so now seems like a good time to refresh our memories about the key provisions of the Pension Schemes Bill from an employer’s perspective.

Continue Reading The Pension Schemes Bill – What employers need to know

Recent determinations of the Pensions Ombudsman¹ have considered the extent to which employers should provide information on pension rights to employees who have notified them of a terminal illness.

The law

There is no general duty on employers to advise employees about their pension rights, or to safeguard employees’ economic well-being. Indeed, the law prohibits anyone other than a person authorised by the Financial Conduct Authority from advising on pension rights.

However, a distinction should be drawn between “advising” and “providing information”. In some situations the law imposes specific duties on employers to provide information about pension rights to employees. When the law is silent, however, getting things right can be tricky.


Continue Reading Providing information about pensions to terminally ill employees – how far should employers go?

Five years ago the pensions world was rocked by George Osborne’s Budget announcement:  DC members would no longer be forced to buy annuities.

Under his “freedom and choice” initiative, tax rules were changed so that DC pots could be used to provide lump sums or drawdown.  At the same time, Pension Wise was introduced – free guidance for DC members about their benefit options.  Later changes to tax law mean that, subject to certain conditions, members can use their DC savings to pay for financial advice.


Continue Reading Freedom and choice – not just for DC?

The government has given the green  light to a new form of defined contribution pension scheme.  At least, it is new to the UK.  “Collective defined contribution” (“CDC”) schemes are common in the Netherlands and Denmark but the idea of introducing this type of scheme into the UK has only relatively recently gained traction.  The fact that the Royal Mail wants to put such a scheme in place for its 140,000-strong workforce has provided the impetus for the government to consult on how CDC schemes would operate and be regulated.

Continue Reading Collective defined contribution schemes: a fresh alternative?

Recent intervention by the Competition and Markets Authority could lead to increased competition in the market for investment professionals who provide services to pension schemes – which should be a good thing for the employers supporting those schemes.

Many occupational pension schemes use the services of investment consultants and / or fiduciary managers.  Broadly, investment consultants advise pension scheme trustees on how best to invest scheme assets – and fiduciary managers make investment decisions on behalf of pension scheme trustees.


Continue Reading Pension scheme investment – a new era of increased competition?

On 6 April, the quality requirements that pension schemes being used for automatic enrolment (“qualifying schemes”) must meet are changing.

DC schemes – what’s changing?

At present, for a DC scheme to be a qualifying scheme:

  • The employer must make a contribution of at least 2% of the worker’s qualifying earnings.
  • The total contributions paid