Will Collective Defined Contribution Schemes take off?
Collective defined contribution (CDC) schemes are now on the horizon, with Royal Mail lining up to be the first UK employer to launch this type of scheme, later this year.
Already well-established in countries such as the Netherlands and Denmark, the schemes were given the green light by the then Work and Pensions Secretary, Amber Rudd, in March 2019.
The new schemes aim to bridge the gap between DB and DC schemes. They may be attractive to companies who are keen to offer a good pension but are less keen on the liability aspects of a DB pension scheme.
CDC schemes provide a regular retirement income by pooling and investing group contributions.
Also known as a type of ‘defined ambition’ scheme, they pay out a target or ‘ambition’ amount, aimed at providing people with a sufficient level of index-linked pension for life.
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