Collective defined contribution (CDC) pensions are approaching a “pivotal moment” in the UK, according to Aon, as the consultancy predicted they could “revolutionise pensions” for both employers and savers.

In its new report, CDC Pensions: Everything You Need to Know in 2026, Aon noted that multi-employer CDC arrangements are expected to begin operating from 2027, following the finalisation of regulations for whole-life unconnected multi-employer CDC schemes.

Last week, the Pensions Regulator’s (TPR) updated code of practice for CDC schemes was laid before parliament, bringing multi‑employer CDC schemes a step closer to market.

Under the new regulations, providers would be able to offer CDC schemes to multiple unconnected employers but would be required to apply to TPR for authorisation before taking on business.

The updated code outlined TPR’s expectations of CDC schemes, the criteria for authorisation and how it will exercise its powers in supervising the market.

In the report, Aon explained that CDC schemes would pool contributions and investment returns, enabling them to provide a target income for life while smoothing outcomes across generations of retirees.

It added that well-designed schemes incorporate transparent benefit adjustment rules and intergenerational fairness mechanisms and have been shown to remain resilient across a range of adverse market conditions, including the Great Depression, the 2008 financial crisis and the Covid-19 pandemic.

Aon partner and head of CDC, Chintan Gandhi, said: “Aon’s research has shown that CDC pensions, for the same contribution level, could on average deliver around 30 per cent better outcomes than a traditional defined contribution scheme lifestyling into an annuity at retirement - while also providing income levels at retirement that are smoother between generations of retirees.

“Whole-life CDC pensions provide a powerful tool to attract, reward, retain and retire employees on time, as well as strengthening organisations’ employee value proposition in competitive labour markets.

"We believe that CDC will revolutionise pensions in the UK, creating value for both employees and employers.”

The report also highlighted the potential for CDC schemes to maintain greater exposure to growth assets and illiquid investments over the long term, including infrastructure and private markets investments.

Looking ahead, Aon said applications for authorisation of multi-employer CDC schemes are expected to open in summer 2026.

The consultancy also suggested that retirement CDC products, allowing members to transfer DC pots into CDC arrangements at retirement, could become available from 2028, alongside new guidance on retirement duties for defined contribution (DC) schemes.

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