The government has launched a consultation on a new way of drawing pension benefits. [1] Read more in this short-read article.
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This article was approved by Best Practice IFA Group Limited on 24 February 2026.
Unless you work for Royal Mail, you probably have not heard of Collective Defined Contribution (CDC) pension schemes. The scheme is most easily understood as a halfway-house between:
- Defined benefit (DB) schemes: which offer guaranteed benefits (usually related to final or averaged salary) funded by variable contributions.
- Defined contribution (DC) schemes: which offer variable benefits, funded by fixed contributions.
CDC schemes generally have fixed contributions and targeted (not guaranteed) benefits. Investments and mortality risks are pooled, as in a DB scheme.
DB schemes have become largely confined to the public sector, because the private sector found variable contributions too variable and, when interest rates fell, too costly. DC schemes are now widespread in the private sector; their growth was boosted 13 years ago by the launch of automatic enrolment in workplace pensions.
Royal Mail’s CDC scheme was announced in 2018 and finally launched six years later. It remains the only CDC scheme in existence in the UK. [2] One reason for this is that CDC works best for employers with a large enough workforce to make the pooling of investment and risk viable. In the private sector, larger employers long ago made the move from DB to DC, and see little to be gained by making another major change to employee retirement provision.
On the other hand, both the current and previous governments have wanted to encourage CDC. The current Pensions Minister, Torsten Bell, told the Financial Times that “We should be confident that this will play a significant part in our future pension system.” [3] His comment coincided with the launch of a consultation paper on retirement CDC schemes.
The proposed retirement CDC will differ from other pension schemes in that it will:
- Only accept transfers for retiring members of other schemes; and,
- Will only have non-contributing pensioner members.
Pension benefits will be targeted, rather than guaranteed, a feature which the government suggests should provide higher overall returns. Legislation currently going through parliament will require pension schemes to give, ‘Guided Retirement’, which could further encourage CDC take-up.
The retirement CDC is still some years away. In the meantime, if you are approaching retirement, professional advice remains the starting point for optimising your pension benefits.
Sources
- https://www.gov.uk/government/consultations/retirement-collective-defined-contribution-pension-schemes
- https://www.pensionsage.com/pa/Royal-Mail-launches-CDC-scheme.php (Article published 7 October 2024.)
- https://www.ft.com/content/36371001-1344-4a8b-beec-62c3ec7da583 (paywalled article)
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