There is widespread support for Retirement CDC, but pension providers and consultants have warned the proposals carry significant complexity, so the government shouldn’t “oversell” this new option as a default retirement solution.
The Government’s consultation on Retirement CDC (RCDC) closed yesterday with a number of pension trade bodies, providers and consultants publishing their response to this. While there was support for this model a number of responses highlighted wanted to see other options available and said untested assumptions and risks must be addressed before implementation.
The response also called for improved governance and communications around CDC to ensure members fully understand the potential risks of such schemes.
The Pensions Administration Standards Association (PASA) supports extending CDC to the retirement phase, describing RCDC as a model that could “transform retirement outcomes for millions”, particularly many auto-enrolled savers ill-equipped to make complex withdrawal decisions.
However, PASA stresses that trustees will require support to balance new responsibilities and warns that successful implementation will rely on “significant resource and careful sequencing”.
It argues that any duty to offer default retirement solutions must only follow full RCDC development, not precede it.
PASA places administration “at the centre” of RCDC success, highlighting the need for tightly integrated systems, real-time pricing, and clear rules around transfers, pot consolidation and trustee communications.
It also warns against rigid cost caps and saysgood governance should be evidenced through PASA Accreditation to build confidence across schemes, members and regulators.
Hymans Robertson calls the consultation “a key milestone”, arguing that Retirement CDC could deliver 25 per cent to 50 per cent higher retirement income compared to annuity purchase or drawdown.
Paul Waters, head of DC markets, says RCDC is particularly suited to members prioritising income over flexibility or legacy.
The consultancy links RCDC closely to the proposed Guided Retirement Duty, suggesting it could provide an appropriate default solution for members who do not take financial advice.
However, Hymans wants future scope for “more flexible forms of CDC”, including designs that pool longevity risk without pooling investment risk.
Aegon adopts a more cautious tone. Pensions director Steven Cameron says the concept “warrants further exploration and analysis” and may ultimately offer value, but emphasises that Retirement CDC is “unproven” and highly complex.
He warns the Government not to “oversell” RCDC as a potential default pension benefit solution, given that projected incomes remain uncertain and depend heavily on investment strategy.
Aegon also raises concerns over fairness, particularly the risk that those in poorer health could subsidise healthier members if no underwriting is used.
Cameron highlights industry capacity concerns amid overlapping reforms and argues that, if proven, RCDC should eventually be opened to the retail market rather than restricted to workplace schemes.
The Investing and Saving Alliance (TISA) welcomes RCDC as part of a guided retirement framework but warns that consumers risk being locked into unsuitable or unfair arrangements without robust safeguards.
TISA’s head of policy Renny Biggins says fairness, transparency and genuine choice must underpin any RCDC offering, adding that outcomes are not guaranteed despite claims of potentially higher income.
TISA calls for actuarial fairness tests, clarity on how risks and benefits are communicated, and assurance that schemes are not pressured into using RCDC as a default.
As with Aegon TISA also argues that retail providers should be allowed to offer RCDC to avoid inconsistent outcomes between savers inside and outside workplace schemes.
The Association of British Insurers (ABI) supports efforts to improve retirement outcomes but warns against overstating what RCDC can deliver. The ABI’s head of long-term savings policy, Justin Wray, says that there is currently “no mechanism to leave a Retirement CDC scheme once joined”, and says this risk would be magnified if schemes default savers into RCDC via guided retirement pathways.
The ABI calls for a built-in cooling-off period and stresses that savers must be given clear, balanced information — including that RCDC income can fall as well as rise.
