U.K. releases proposals for collective defined contribution plans
The U.K. Department of Work and Pensions is seeking views from trustees and plan sponsors on its draft collective defined contribution plan regulation published Monday.
The proposal follows the U.K. Pension Schemes Act 2021, which permitted employers for the first time to launch collective DC plans, also referred to as collective money purchase plans.
In a CDC plan, income is secured by pooling plan participants’ assets and investments, and participants bear the longevity and investment risk. That is in contrast to defined benefit funds where the sponsoring employer bears all the risk.
The arrangement can give employers more predictable running costs of plans, the DWP said Monday, also noting that CDC plans have more potential to invest in illiquids and could be more resilient to sudden market downturns.
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