All multi-employer collective defined contribution (CDC) scheme members deserve the same protections, Aon has argued, in response to the Department for Work and Pensions (DWP) consultation on legislation to extend CDC provision beyond single or connected schemes.

The draft legislation removes the exclusion of unconnected multi-employer CDC schemes from operating under the existing CDC provisions and sets out what CDC schemes that are whole-life unconnected multi-employer schemes must do to become authorised and to operate effectively under regulatory oversight.

Aon head of collective DC and partner, Chintan Gandhi, said this “long-awaited” consultation, which closes today (19 November) marks a “significant” next step for the development of CDC in the UK.

He said that opening up to multi-employer whole-life CDC schemes, including those provided by master trusts, would meet the needs of employers and the self-employed, arguing that these schemes have the potential to help over 30 million UK workers build up a pension.

However, Gandhi suggested that members of all whole-life, and, in the future, all decumulation-only, multi-employer CDC schemes deserve the same protection to safeguard their pensions, regardless of the nature of the scheme selected on their behalf.

Given this, he said it was Aon’s “strong” view that all multi-employer CDC schemes should have a scheme proprietor and a specific person responsible for promotion and marketing and in all cases, both must be assessed by The Pensions Regulator (TPR) against the fit and proper person requirements.

He noted that this was an “important” safeguard that would ensure quality and protection for all members of CDC schemes, regardless of whether they are in a non-commercial or not-for-profit multi-employer scheme or commercially-run.

Aon partner and head of UK retirement policy, Mathew Arends, argued for the “swift” extension of TPR’s CDC guidance and said this was of "equal importance" as the regulations.

“It is only with visibility of the entire regulatory regime that providers can judge whether they can introduce whole-life multi-employer CDC schemes to the masses - and in a way that is commercially viable,” Ardens added.

“Following on from the Mansion House announcements last week, the swift introduction of scalable whole-life multi-employer CDC schemes could also help to progress the government’s wider pension priorities.

“By their nature, well-designed and well-run multi-employer CDC schemes will be of suitable size and ideally suited to investing in productive asset classes.”

In addition to this benefit, Gandhi said multi-employer whole-life CDC schemes, including those delivered by master trusts, would allow investment and longevity risks to be shared across the scheme membership, while, on average, providing better pension outcomes in retirement than could otherwise be available.

Furthermore, he also suggested that whole-life CDC would provide employees with an income for life in retirement, which is expected to keep pace with the cost of living, without individuals needing to make “complex” decisions. 

“This type of multi-employer whole-life CDC scheme should be of interest to all employers in addition to those who are paternalistic and/or have unionised workforces,” Gandhi added.

“The new regulations introduce greater flexibility in CDC scheme designs that will also suit all employers’ circumstances, including in sectors where workforces are transient in nature, or where they typically move around between a group of employers.”

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