WTW’s LifeSight master trust has confirmed its intention to launch a retirement collective defined contribution (R-CDC) solution, subject to the introduction of a supporting UK regulatory framework.

The £30bn defined contribution (DC) master trust said the proposed solution would provide members with an additional retirement option, designed to help address the growing challenge of converting DC savings into a sustainable retirement income.

LifeSight’s sponsor, WTW, has been involved in the development of collective defined contribution (CDC) models in the UK, and added that the launch would build on its work in advancing collective pension approaches.

However, the introduction of R-CDC remains contingent on final government regulations, alongside trustee and regulatory approval.

WTW head of LifeSight UK, Jelena Croad, said the scheme believed R-CDC could play a central role in improving retirement outcomes for DC savers.

“We believe R-CDC will be the best option for the majority of DC members reaching retirement who want the highest sustainable lifetime income from their pension pot," she continued.

“R-CDC does this without putting the burden of managing pensions decisions onto the member. This is why we intend to offer R-CDC as soon as legislation allows.

“We are excited to introduce R-CDC in LifeSight, which would be a first in the UK, as part of our range of retirement options.

"This aligns with our long-standing commitment to innovation and our ambition to provide members with better retirement outcomes.

“We also believe R-CDC will play an important role for those members who don’t want to make active decisions with their retirement savings in later life. We see R-CDC as a key part of guided retirement.”

LifeSight chair of trustees, Simon Ellis, added that the move reflected the scheme’s focus on member outcomes.

“Member outcomes are at the heart of all trustee decisions," he said.

"It is very exciting and satisfying that LifeSight is leading innovation in this area, by offering a range of new solutions to members which are expected to address the significant challenges facing DC retirees."

Under the proposed model, R-CDC would enable members to convert their DC savings into a lifelong income, with payment levels adjusted over time based on collective investment performance, longevity experience and future expectations.

Adjustments would be determined by an independent actuary using assumptions set by trustees, under the oversight of an expanded code of practice from The Pensions Regulator (TPR).

The government is expected to publish draft R-CDC regulations later this year, with final regulations and TPR authorisation anticipated in 2027/28.

At retirement, LifeSight members are expected to be able to choose between R-CDC, its ‘Flex and Fix’ option, or existing decumulation routes such as cash, annuities and traditional drawdown.

WTW has also suggested that R-CDC could deliver higher lifetime income than other DC retirement options in most scenarios, based on its internal analysis.

Pensions Minister, Torsten Bell, said that the development of R-CDC represented a significant step forward for retirement provision.

“Retirement CDC offers hardworking people who have spent decades saving in a DC scheme a different option for their retirement – one where risks are shared, returns are more predictable, and the focus is on securing a reliable income for life,” he stated.

“Alongside our wider pension reforms which will drive costs down and lift workers’ retirement saving returns up, Retirement CDC is a significant step towards helping millions of people get the security they deserve in later life.”

WTW, head of UK retirement, Rash Bhabra, added that the plans were built on the firm’s involvement in the UK’s first CDC scheme.

“WTW advised Royal Mail on the development of their CDC scheme, the first of its kind in the UK, and currently serves as scheme actuary to the Royal Mail Collective Pension Plan," he said.

“We are pleased the government continues to be supportive of CDC, and sees this as an area where pension schemes can support the UK’s economic growth and bring benefits to UK workers.

"We look forward to continuing to work with government to bring to life the vision of CDC pensions for DC savers.”

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