CDC: The Next Phase of UK Pension Reform

In our last article on CDC, ‘Collective DC pensions – where are we now?’, we explored the proposed expansion of CDC through multi-employer and decumulation-only models and why multi-employer CDC matters. Since then, regulations extending the CDC framework to permit unconnected multi-employer schemes (UMES) have come into force, authorisation applications are open and providers are actively preparing their market offerings. 

We examine in this article the latest position on CDC and highlight the key practical issues trustees and employers should consider as this rapidly evolving market develops.

The new framework is live

The regulations enabling UMES CDC schemes to become authorised came into force on 31 July 2026. This removes the restrictions previously limiting CDC to single or connected employers and is likely to broaden the market significantly. Unrelated employers may now participate in a single scheme, opening the door to new commercial providers and risk pooling benefits for a much wider range of employers.

Alongside the regulations, the Pensions Regulator's (TPR) revised CDC Code of Practice (the Code) came into force at the same time. The new Code covers both single employer CDC schemes and UMES, replacing the previous framework for single and connected employer CDC schemes. 

The revised Code contains substantial revisions which reflect the more commercial nature of unconnected multi-employer CDC schemes (UMES). Aside from expanding on the existing expectations relating to governance, financial sustainability, fitness and propriety and ongoing supervision, the revised Code introduces some new concepts, including:

• Scheme Proprietor: UMES will need to appoint a ‘scheme proprietor’ which is a company or partnership which is independent of the trustee and responsible for funding some or all the costs of setting up and running the scheme and for making business decisions relating to its commercial activities. 

• Promotion and Marketing: there are new promotion and marketing requirements which prohibit trustees from promoting or marketing the scheme, and it provides that marketing materials must be clear and not misleading. There will need to be adequate systems and processes in place to ensure compliance with this new requirement and any deviations within marketing materials must be rectified.

• Business Plan: a new requirement for UMES (replacing the previous ‘employer support’ requirement for single-employer schemes) involves the need for a sound business strategy evidenced by a business plan.

TPR has published supplementary guidance covering topics such as application fees, CDC sectionalisation and fit-and-proper requirements. The Financial Reporting Council also issued a revised Technical Actuarial Standard (TAS 310) for CDC actuarial work, in force from 31 July 2026. TAS 310 places particular emphasis on fairness between different cohorts of members — especially significant in multi-employer arrangements where membership profiles may vary considerably.

TPR began accepting authorisation applications from the start of August 2026, and we understand discussions with prospective providers are already under way.

The current market: Royal Mail and beyond

The Royal Mail Collective Pension Plan remains the only authorised and operational CDC scheme in the UK. Launched in October 2024, it now has more than 100,000 members and continues to serve as an important test case for the wider market.

While CDC can smooth some financial risk through collective investment and risk-sharing, it cannot, of course, eliminate them entirely. The Royal Mail CDC Plan’s early experience underscores the importance of clear communication and managing member expectations to ensure they understand that a CDC pension is a target rather than a guarantee. Reports indicate some volatility – whilst the Royal Mail CDC fund fell approximately 4.6% in its first six months, it delivered a pension increase of 6.4% in its first year. This demonstrates that CDC schemes clearly still have market exposure, although short-term asset movements would not necessarily translate into pension adjustments given the scheme's multi-decade investment horizon and funding margins.

The wider CDC market is beginning to emerge:

• TPT Retirement Solutions has publicly committed to establishing a whole-of-life multi-employer CDC arrangement and is targeting launch in 2027. 

• Aon announced plans in August 2026 to introduce a multi-employer CDC section within The Aon Master Trust beginning in 2028. 

• WTW confirmed in March 2026 its intention to launch a Retirement CDC solution through its £30bn DC master trust, LifeSight and it intends to offer R-CDC as soon “as the legislation allows." 

• Reports indicate other organisations, including Pensions Mutual and the Church of England Pension Board, have expressed interest in CDC arrangements.

The direction of travel in the market is clearly towards a more innovative and broader CDC market. The question remains, though, whether employers will choose CDC over more established DC arrangements, particularly if those schemes already benefit from scale, familiarity and competitive charging structures. Providers will therefore need to demonstrate the benefits CDC can offer to both employees and employers given the additional governance and compliance requirements. 

A recurring theme emerging from both UK and international CDC experience is the importance of member communications. Trustees and providers will need to explain clearly that the pension provided is a target rather than a guarantee and that outcomes depend on the performance of the collective fund over time. There is also relatively limited performance data in the UK for CDC to analyse – again, that means early engagement from employers is likely to be more challenging. 

CDC experience in the Netherlands helps us understand some of the issues facing the UK market. The Dutch model demonstrates that perceptions of fairness between different generations and membership groups can become a significant issue where risk-sharing arrangements are not properly understood. There is the potential for cross-subsidy between different demographic groups based on different mortalities. This may be addressed through, for example, creating multiple sections to reflect similar membership groups. UMES CDC may help mitigate some of these risks through greater cost efficiency spread across many employers and assets remaining invested for longer.

Retirement-only CDC

Alongside whole-of-life CDC, the Government is continuing to develop a framework for retirement-only CDC (R-CDC). Further to the DWP’s updated pensions roadmap, we are expecting a consultation on the draft  R-CDC regulations in Autumn 2026, followed by final regulations in Autumn 2027. 

The development of R-CDC is particularly relevant given the wider Guided Retirement reforms under the Pension Schemes Act 2026, which will require trustees to offer default pension benefit solutions tailored to the specific needs, interests and circumstances of the membership. The DWP has indicated that R-CDC could play an important role within its wider guided retirement reforms. As a result, trustees and employers of DC schemes may wish to consider whether CDC could form part of their future decumulation strategy as the market develops and approved products become available. 

Under R-CDC, members would transfer existing DC savings into a collectively managed arrangement at or near retirement, in exchange for a variable lifelong income. Unlike traditional annuities, benefits would not be guaranteed, but members would benefit from collective investment and longevity risk-sharing — potentially delivering higher expected income in return for accepting some degree of variability.

Practical considerations for trustees and employers

While the market remains in its early stages, it is not too soon for trustees and employers to begin considering where CDC might fit within their long-term pension strategy. For employers, CDC may offer an additional means of supporting retirement adequacy and differentiating their benefits offering without taking on the open-ended funding obligations associated with traditional DB provision. For trustees, particularly those responsible for DC arrangements, CDC may become increasingly relevant as new decumulation requirements and retirement solutions emerge.

Practical considerations

• CDC is not a single product. Whole-of-life multi-employer CDC, bespoke single-employer CDC and retirement-only CDC may each be suitable in different circumstances and so employers and trustees will need to consider the demographics of their pension membership profile carefully.

• The first wave of commercial providers is now emerging, with TPT targeting launch in 2027 and other providers set to follow. It is encouraging to see new provider appetite to enter this new market. Over time, we expect to see more competition and opportunities to compare different arrangements as these schemes become established. 

• Despite growing interest, adoption of CDC is unlikely to be immediate. Employers and trustees may wish to seek further evidence of operational resilience, member outcomes and communication effectiveness before committing to a relatively new structure. The pace of adoption could depend heavily on the experience of the early generation of commercial CDC schemes.

• R-CDC could become an important option for trustees considering their future retirement and decumulation strategies, particularly in light of the forthcoming Guided Retirement provisions in the Pension Schemes Act 2026. This is an area to watch closely. 

• CDC benefits are targeted rather than guaranteed. As explored above, ensuring members understand this distinction will be critical to managing expectations and maintaining confidence in the arrangement. Effective member communications will be crucial to ensure members understand this.

• CDC introduces governance, investment and communication complexities that differ significantly from traditional DC arrangements. Trustees and employers should satisfy themselves that any provider's operational model is robust and fully understood. This may be challenging in the early years while the market becomes more established. Over time, we expect to see greater third-party analysis comparing CDC strategies, investment performance, member support and the effectiveness of communication approaches.  

• The regulatory framework continues to evolve, particularly in relation to retirement-only CDC. Trustees and employers will therefore need to continue to monitor developments closely with their legal advisers.

The road from here

CDC has certainly moved beyond conceptual policy. The regulatory framework is in place, UMES authorisation is available and a growing number of providers are preparing to enter the market. Whether CDC becomes a mainstream component of workplace pension provision will depend on its ability to demonstrate better member outcomes than existing DC arrangements while maintaining confidence in its governance and communication framework. The success of the first generation of commercial CDC schemes is likely to play a significant role whether CDC becomes a mainstream part of the UK pensions landscape or a niche alternative to traditional DC. Trustees and employers should therefore begin evaluating where CDC might sit within their long-term retirement benefits strategy. 

The Burges Salmon DC pensions team is monitoring developments in the CDC market closely: the new provider entrants, regulatory guidance changes and retirement-only CDC in the context of the Guided Retirement reforms under the Pension Schemes Act 2026. You can subscribe to our monthly pensions law updates by clicking here.

If you would like to discuss any aspect of this article, please contact Susannah Young, Partner, or Jack Gillions, Director, or your usual Burges Salmon contact.

This article was co-written by Jack Gillions and Fahmida Rahman.