The following Pensions practice note Produced in partnership with Sharon Piert of CMS 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 under the Pension Schemes Act 2015 to enable the creation of defined ambition schemes such as collective defined contribution (CDC) schemes. It is not maintained and is for background information only. For more information on the current legal framework for CDC schemes, see Practice Note: Collective defined contribution (CDC) schemes—an introduction.
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.
The Department of Work and Pensions (DWP), in its 2012 strategy paper, Reinvigorating Workplace Pensions, said that 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 seek to ensure less cost volatility for employers than current DB pensions.'
In a traditional DB scheme, the employer tends to bear all of the risk in terms of the fund's investment performance, inflation and member longevity. There has been a marked
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