The following Pensions guidance note Produced in partnership with Chris Brown and Andrew Walls of Burges Salmon LLP provides comprehensive and up to date legal information covering:
ARCHIVED: This archived Practice Note provides information on the legal framework which had been put in place for collective defined contribution (CDC) schemes under the Pension Schemes Act 2015. It is not maintained and is for background information only. For more information on the current legal framework for CDC schemes, see Practice Note: Defined ambition—collective defined contribution (CDC) schemes.
Collective defined contribution (CDC) schemes are a type of defined contribution scheme in which the assets are pooled on behalf of members without members having any interest in particular assets.DWP Public Consultation: Reshaping workplace pensions for future generations (November 2013—Chapter 5DWP government response to the consultation: Reshaping workplace pensions for future generations (June 2014)—Chapter 3
They are being promoted by the government as part of its reforms to reshape workplace pensions.
This Practice Note explains a little of how they work, comments on the advantages and disadvantages associated with them and summarises the government's proposed legislative reform to facilitate CDC schemes in the UK.
One of the main aims of a CDC scheme is to supply funds sufficient to provide a targeted income and to provide at least some inflation proofing for it. An employer makes fixed contributions to the scheme but with no liability to fund a certain level of benefits. Members are informed of their target income in retirement based (for example) on a percentage of their career average revalued earnings. Critically, this target income is an ambition—it is not guaranteed. This means that if the assets held by the scheme are insufficient to pay the target
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