Collective defined contribution (CDC) schemes
Collective defined contribution (CDC) schemes

The following Pensions guidance note provides comprehensive and up to date legal information covering:

  • Collective defined contribution (CDC) schemes
  • What is defined ambition?
  • What is a collective defined contribution scheme?
  • Advantages of CDC schemes
  • Disadvantages of CDC schemes
  • The government’s CDC work
  • What will the second CDC framework look like?
  • What are the next steps?
  • Defined ambition alternatives to CDC

FORTHCOMING DEVELOPMENT: On 16 October 2019, the government published a new Pension Schemes Bill that, among other things, would have provided a framework for the establishment, operation and regulation of collective money purchase schemes (commonly known as Collective Defined Contribution (CDC) pensions). For more information, see News Analysis: Pension Schemes Bill 2019 (Part 4)—collective money purchase schemes.
As a result of the general election of 12 December 2019, the Pension Schemes Bill fell away on the dissolution of Parliament after midnight on 6 November 2019. However, it may be reintroduced in Parliament following the general election (especially as the Bill received cross-party support).

What is defined ambition?

One of the key principles of defined ambition is the idea of ‘risk sharing’ in the sense that neither the employer nor the members bear all or a majority of the risk in the pension scheme. A defined ambition pension scheme has some features that are found in a traditional defined benefit (DB) pension scheme and some features that are found in a traditional defined contribution (DC) pension scheme.

According to the Department of Work and Pensions (DWP), the:

'aim of a [defined ambition] pension would be to create greater certainty for members than is provided by a pure DC pension. It would also