Accumulation collective defined contribution (CDC) pension schemes will be able to receive transfers without member consent in the same way as master trusts, although retirement CDC schemes have been excluded from the provision, the Department for Work and Pensions (DWP) has revealed.

In its response to chapter nine of the retirement CDC consultation, the DWP highlighted that members will retain the right to transfer out of CDC schemes they have been transferred into without consent until their benefits are crystallised.

However, it did not consider it appropriate to be able to transfer members without consent into a retirement CDC scheme as they may not be able to transfer out if they wanted to.

Regarding the suggestion that trustees should take advice before a transfer takes place, the government has adopted the same approach that is taken in master trusts.

Non-statutory guidance for trustees on transfers without member consent to master trusts states that advice is not required, as their fiduciary duty will require them to assess member best interest before transferring.

“This will include an assessment of the differing nature of CDC schemes and why such a transfer would be in the interests of the members,” the DWP noted.

“The guidance also makes clear that trustees are not prohibited from taking advice if they consider it appropriate to carry out their fiduciary duty. We intend to follow the same approach taken by master trusts.”

Commenting on the consultation response, Lumera commercial director for data & dashboards, Maurice Titley, said: “The DWP has drawn an important distinction between CDC accumulation schemes and retirement CDC arrangements.

“Allowing transfers without member consent where savers retain a statutory right to transfer out supports consolidation and gives trustees greater flexibility to move members into authorised CDC schemes where they believe it is in members' interests.

“At the same time, excluding retirement CDC schemes recognises that member choice should remain a key consideration where transfer options become more limited.

“As the CDC market develops, maintaining confidence in these new arrangements will depend on strong governance, clear communications and ensuring members fully understand the implications of any transfer."

Titley added that the policy reinforced the importance of robust administration, high-quality member data and investment in technology.

“While consolidation can deliver efficiencies of scale and improved value for money, transferring members between schemes inevitably creates operational complexity, particularly where legacy systems and data structures are involved,” he continued.

“Trustees and providers will need the technology and data capabilities to support accurate transfers, effective member communications and ongoing administration if they are to realise the full benefits of consolidation."

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