Industry experts have argued that work on retirement collective defined contribution (CDC) should be accelerated to ensure it dovetails with the guided retirement duty, although broader concerns around the final detail of the regime remain.

The government recently launched a consultation on retirement CDC, which would allow people who have saved into a DC scheme to transfer their pension pot into a CDC scheme at retirement.

Hymans Robertson head of DC markets, Paul Waters, highlighted the consultation as a “key milestone” in the advancement of the evolution of CDC and a welcome development for members.

“Retirement CDC has the potential to deliver between 25 per cent and 50 per cent higher income in retirement than a DC member purchasing an annuity or following a drawdown strategy," he stated. "This is not without trade-offs, so is ideal for DC members who need to maximise their income over retaining flexibility or passing on a legacy."

He also suggested that retirement CDC is a natural fit with the proposed guided retirement duty for pension schemes.

However, there are concerns over the current timing and whether this will be possible in practice, with the Society of Pension Professionals (SPP) suggesting that the timescales for authorising Retirement CDC schemes should be accelerated to dovetail with the introduction of the guided retirement duty, which is expected to come into force in early 2027.

SPP CDC Committee chair, Keith McInally, said: “The SPP is pleased that the government is moving quickly on retirement CDC policy and we very much welcome the policy framework that is being proposed.

"However, there remains a substantial timing challenge relating to guided retirement. If the government were to introduce their guided retirement requirements on DC schemes in advance of retirement CDC being made available, schemes may not have much appetite to revisit their guided retirement options in the short term.

"Our response suggests some practical solutions to this challenge, and we look forward to working with government to ensure savers don’t miss out.”

The Association of Professional Pension Trustees (APPT) agreed that the retirement CDC framework should dovetail with the forthcoming guided retirement obligations on schemes, arguing that members should experience a coherent, joined-up journey rather than multiple overlapping or conflicting communications.

Association of Consulting Actuaries (ACA) chair, Stewart Hastie, echoed this, arguing that "it is important that Retirement CDC arrangements are available for trustees to select as their default, before the guided retirement requirements are brought into force under the Pension Schemes Bill".

"Otherwise, there is a risk that trustees will select their default from the more limited options available," he stated. "This in turn could lead to sub-optimal outcomes for savers/members and could have significant implications for the likely size of the retirement CDC market.”

Broader concerns also remain, as the ACA said a prohibition on prospective member or member marketing would need careful consideration, stressing the need for members to be provided with suitable information about CDC, where the scheme’s trustees are providing retirement CDC as an option or as the default.

“Whilst we note the reasons for limiting the initial legislation to enable retirement CDC schemes operating in the non-retail market, we would strongly encourage extension to the wider retail market as soon as possible, once the initial schemes are established,” Hastie added.

Clarity on disclosure standards is also needed, as APPT vice chair, Vassos Vassou, argued that "for RCDC to work effectively, members must understand the nature of the product—particularly the collective risk-sharing (including any approach to cohorting), the absence of guarantees, and the potential for benefit adjustments".

"Clear, consistent and non-technical communications are essential, both at the point of entry and throughout the member’s lifecycle, including prior to retirement," he stated.

“Trustees will need certainty about the minimum disclosure standards, the required risk warnings, and the expected format of member literature.

"These requirements should be set out unambiguously and aligned, where possible, with existing CDC and decumulation-related disclosure regimes to avoid duplication and inconsistency."

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