More than three quarters (76 per cent) of those in the pensions industry are assessing, exploring or expect to explore collective defined contribution within three years, according to a Gallagher survey of 250 employers, trustees and pensions professionals.
Around half (52 per cent) of respondents said that they would be comfortable being an early adopter of CDC. Additionally, 53 per cent claimed that they would be most likely to consider a multi-employer or master trust CDC arrangement.
Almost nine in ten (86 per cent) stated that a sector-wide CDC arrangement would be appealing. Among respondents working with schemes of fewer than 250 members, only 51 per cent are exploring CDC within three years.
David Piltz, chief executive of Gallagher’s benefits and HR consulting division, says: “While many in the pensions industry are already on board, including key individuals at employers, that alone isn’t enough: moving CDC from ‘interested’ to ‘implement’ will require winning over wider stakeholders – unions being a key example.
“For employers and trustees, the next step is to understand whether CDC could help address a specific pension challenge within their organisation. This means testing the model against workforce needs, existing pension arrangements, governance capacity, and the evidence needed to support a decision.”
The launch of Royal Mail’s single employer CDC scheme in October 2024 gave the market a live example against which to assess the CDC model. Andrew Fifer, an actuary at Gallagher, says this matters because employers can now begin to compare CDC with existing DB and DC arrangements.
The most cited advantages of CDC implementation was better value for money (36 per cent), more stable retirement incomes for employees (33 per cent), and potential for higher retirement incomes over time (28 per cent).