Consultation outcome

The Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025

Updated 23 October 2025

Ministerial Foreword

I am very pleased to be publishing the Government’s response to this hugely important consultation on our multiple employer collective defined contribution (CDC) schemes. Following the landmark launch of the UK’s first CDC scheme in October 2024, the accommodation of these schemes is the next step in delivering this important innovation to our pensions landscape

Many pension providers and employers have made it clear to me their wish to see the numerous benefits of CDC pension provision extended. I understand why as we look ahead to a world where defined contribution (DC) savings form the bedrock of most savers private pension income in retirement.

To get the best outcome for savers in this new world, we need fewer, bigger and better pension schemes, and collective funds are a key part of that. We’re going further and faster to revolutionise the pensions landscape, working with the pensions industry to harness the full potential of CDCs, boosting returns for future retirees by pooling pension investments.

I would like to thank everyone who responded to the consultation on the draft regulations, your engagement and expertise has been invaluable. The broad support for the draft regulations is not surprising but is welcome, while the constructive suggestions as to how they could be improved have been invaluable.

Government has listened and in response made changes which ensure a proportionate regulatory burden whilst still retaining a robust framework which ensures that only well-designed and well-run CDC schemes which members can have confidence in are able to operate. These regulations are being laid in draft before Parliament today and, subject to approval from my fellow Parliamentarians, we intend to bring the legislation and an updated Pensions Regulator’s Code of Practice into force on 31 July 2026. 

These regulations are crucial, but I also want to see how CDC could benefit today’s DC savers. That is why, today we are also publishing a consultation on policy proposals which could help make CDC a retirement option for schemes carrying out their new guided retirement duties, as envisaged in the Pensions Schemes Bill 2025.

This will help deliver a modern pension system, part of our wider reforms to complete the job of making our pensions landscape fit for the 21st century.

Torsten Bell, Minister for Pensions

Chapter 1: Introduction

About the Government response

1. This document forms the government’s response to the public policy consultation^{[footnote 1]} that was launched on 8 October 2024 and ran for 6 weeks.

2. The consultation sought views on draft legislation - the Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025 (“the Unconnected Multiple Employer CDC Regulations 2025”) - needed to extend CDC provision beyond single or connected employer CDC schemes.  

3. The draft regulations would remove the exclusions which prevent unconnected multiple employer CDC schemes from operating under the CDC legislation and set out what collective money purchase (commonly referred to as “CDC”) schemes that are whole-life unconnected multiple employer schemes (“unconnected multiple employer CDC schemes”) must do to become authorised, to operate effectively under regulatory oversight, and what happens if changes need to be made to these schemes.  

4. The consultation also sought views on draft amendments to secondary legislation previously amended by the Occupational Pension Schemes (Collective Money Purchase Schemes) (Modifications and Consequential and Miscellaneous Amendments) Regulations 2022. These were set out in the draft Occupational Pension Schemes (Collective Money Purchase Schemes) (Miscellaneous Amendments) Regulations 2025.

Responses to the consultation

5. We received 50 responses to the consultation itself. These were made up of 9 from membership bodies; 6 from dedicated consultancy firms, 2 from dedicated Master Trust sponsors and 2 that do both; 6 from law firms; 4 from trade unions; 4 from corporate occupational pension schemes; 3 from trade associations; 3 from asset managers; 3 from financial services companies; 2 from individual respondents and 1 each from a UK charity, a local government body, a pensions administrative services company, a personal services company, a professional trustee and an insurer. 

6. Before, during and after the public consultation, we also conducted informal engagement with a range of industry stakeholders, the Pensions Regulator (“the Regulator”), and the Financial Conduct Authority (“the FCA”).  

7. This document highlights the key issues raised in response to the consultation questions (which are repeated at the start of each chapter) and the government’s response but is not an exhaustive commentary on every response received nor every change made to the draft regulations we consulted on. Some more technical revisions, such as additional amendments to definitions of scheme rules in other legislation to capture new legislative overrides, have not been described below, but are intended to ensure the legislative regimes work correctly 

8. Subject to parliamentary approval, we intend to bring this legislation and an updated Code of Practice (“the Regulator’s Code”) into force as soon as practicable with the aim of allowing unconnected multiple employer CDC schemes to be able to apply to the Regulator for authorisation to operate from the summer of 2026.  

9. This policy applies to Great Britain. It is envisaged Northern Ireland will make corresponding regulations to ensure a common approach across the United Kingdom.

Chapter 2: Legislation for unconnected multiple employer CDC schemes

Scope and application

Section 3 of the Pensions Schemes Act 2021 (“the 2021 Act”) and regulations 3, 27, 28 and 61 of the Unconnected Multiple Employer CDC Regulations 2025: CDC schemes divided into sections.

Question 1: Do you think draft regulation 25 delivers the policy intent for the opening of a new section for unconnected multiple employer CDC schemes?

Summary of Responses

10. There were 40 responses to this question. 38 respondents agreed with the approach but 25 of those were keen to avoid inadvertent sectionalisation, which would undermine the benefits of pooling, and sought clarity on how we and the Regulator envisaged this working in practice. Concerns raised included how the trustees would determine the triggers in the first place, what might constitute an actual trigger for sectionalisation and examples of the triggers that would lead to a material change in the qualifying benefits. Respondents also highlighted the need to ensure that normal changes to the investment strategy, which may reflect changing market conditions or demographics of the scheme, would not inadvertently be caught by this regulation. 

11. Only two respondents disagreed with the proposed approach. One of these was concerned that the approach may lead to excessive sectionalisation given that more clarity was needed on how this process would work in practice and the other thought that the approach was too restrictive and needed to be far more flexible. 

12. More broadly, four respondents also sought clarity on whether the qualifying schemes provisions at section 3 of the 2021 Act accommodated the provision of commutation and other lump sum payments. This was an issue that was also raised with section 3 of the 2021 Act and the supporting Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022 (“CDC Regulations 2022”) for single or connected employer schemes (“SCES”).

Government response

13. We recognise that excessive sectionalisation is undesirable as it would diminish the benefits of pooling in CDC schemes. This is why we have designed flexibility in the new triggers for determining when an unconnected multiple employer CDC scheme should sectionalise. The new triggers give the trustees the power to set the parameters that, if breached, would require a new section to be opened. In addition, the process provides the trustees with the flexibility to change these parameters where appropriate. This may, for example, be needed to reflect a significant change in the scheme’s demographics.

14. We acknowledge that investment strategies are likely to change over time reflecting market movements. We do not envisage that these routine changes would be captured by the new triggers for sectionalisation. The changes in investment strategy, that would necessitate the opening of a new section, are those that would result in a material difference in qualifying benefits. 

15. The amended Code, which will be consulted on, will set out the standards the Regulator will expect to see in this context. This will include their expectations regarding the potential circumstances that might trigger the need to sectionalise and what information trustees should provide to satisfy the Regulator that the parameters for sectionalisation are appropriate.

16. With regards to the concern raised that the existing CDC legislation prevents commutation payments, we can confirm that our policy intention has always been that these types of payment should be permitted if they are provided for in scheme rules. We can also confirm that we do not consider that the CDC legislation as currently drafted prevents these payments from being made. This includes full commutation where that is permitted by the tax rules. 

17. Since the consultation, the draft regulations have been revised to amend section 3(2) of the 2021 Act to further extend the definition of a qualifying scheme (see regulation 3). The amendment has the effect that organisations can open an unconnected multiple employer CDC scheme without the need for a participating employer to help establish the scheme. In particular, this is in line with our stated policy intention to enable commercial organisations to establish such schemes.

Section 49(2)(b) of the 2021 Act and regulation 24 of the Unconnected Multiple Employer CDC Regulations 2025: Definition of connected

Question 2: Do you think the definition of connected in draft regulation 22 can work effectively to establish whether a scheme is a single or connected employer CDC scheme or an unconnected multiple employer CDC scheme?

Summary of responses

18. There were 28 respondents to this question with 27 agreeing that the definition worked as intended. Four respondents thought that using the same definition of connected as the Master Trust regime would provide for more consistency in the market. Of those that agreed with the definition, three thought that the Unconnected Multiple Employer CDC Regulations 2025 should also be open to single or connected CDC schemes to apply under if they wished to. On similar grounds, the one respondent who disagreed with the definition did so because they thought it should be broad enough to allow single or connected CDC schemes to apply under the framework set out in the Unconnected Multiple Employer CDC Regulations 2025. 

19. Several respondents queried what would happen in a scenario where a scheme was authorised as an unconnected multiple employer CDC scheme but then only ended up with a single connected employer e.g. because of transfers out or low take up. Two respondents asked if there was a risk that schemes could switch between the single or connected and the unconnected multiple employer CDC authorisation frameworks, and one respondent suggested that we should not force a scheme that definitionally changes from being an unconnected multiple employer to being a single or connected employer CDC scheme, to seek new participating employers.  

20. Four respondents sought clarity on how the unconnected multiple employer CDC authorisation frameworks would interact with the authorisation framework set out in the Occupational Pension Schemes (Master Trust) Regulations 2018 (“the Master Trust Regulations 2018”). For example, they asked how the two authorisation regimes would interact if an authorised Master Trust decided to open a CDC section.

Government response

21. Considering the strong support for the definition of connected, we are content that the definition could remain largely unchanged. We are, however, removing regulation 24(3), which was introduced in the Master Trust legislation but is not pertinent in our view for unconnected multiple employer CDC schemes. Section 47 of the 2021 Act - which is the regulation making power we are using to make many of the provisions of these regulations - is not broad enough to make provision to permit single or connected employer CDC schemes to apply for authorisation under the Unconnected Multiple Employer CDC Regulations 2025. Section 47 can only be used for the purpose of extending CDC beyond single or connected employer schemes to schemes that are not established with the help of a participating employer and schemes used (or intended to be used) by unconnected employers. 

22. To reiterate, the policy intention is for there to be two separate CDC authorisation frameworks, and we do not want schemes to switch between them (either by intention or circumstance). We will continue to monitor the regulations to ensure their effectiveness in this regard.  

23. The Unconnected Multiple Employer CDC Regulations 2025 (together with the 2021 Act) and the Master Trust Regulations 2018 (together with the Pension Schemes Act 2017) are entirely separate authorisation frameworks. Therefore, if the trustees of an authorised Master Trust wanted to open a CDC section, they must apply for authorisation of the CDC section under the Unconnected Multiple Employer CDC Regulations 2025, regardless of whether the Master Trust has already been authorised by the Regulator. They would of course also still be required to continue to meet the Master Trust authorisation criteria in relation to the remainder of the scheme that is not a CDC section (see section 1(1A) of the Pension Schemes Act 2017 to be inserted by regulation 81 of the draft regulations).

The application process

Regulations 7 and 31 of and Schedule 1 to the Unconnected Multiple Employer CDC Regulations 2025: Fit and proper persons requirement

Question 3: Do you have any comments on the draft regulations on the fit and proper person requirements?

Question 4: Do you agree with the functions we have identified for the role of Chief Investment Officer?

Summary of Responses

24. There were 25 responses to question 3, and almost all respondents fully agreed the draft regulations were appropriate. There was a consensus that fit and proper person requirements should be extended to multiple employer CDC schemes. 

25. Two respondents felt that the fit and proper person requirements should be limited to those responsible for the operation of the scheme and that people who are appointed as delegates (such as an individual responsible for the marketing and promotion of the scheme), should not be assessed by the Regulator.  

26. Four respondents, whilst not disagreeing with the fit and proper person requirements, believed that CDC trustee boards should be required to be at least one third member nominated trustees.

27. There were 26 responses to question 4, and not a single respondent argued that a Chief Investment Officer (“CIO”) should not be included for assessment against the fit and proper persons criteria. The majority of the respondents agreed that the activities identified in the consultation document were the correct ones. However, 3 respondents did feel that these activities were too broad, and that specifically “communication of the scheme’s investment strategy” should not be included.  

28. Only two respondents felt that there should be a mandatory requirement for a scheme to have a CIO, and in contrast to this a number of respondents highlighted that many of the activities identified could instead be carried out by the scheme’s trustees. Seven respondents stressed the importance of ensuring the drafting is clear that while the CIO should be included, third party investment managers, advisers and consultants should not be in scope. 

29. We did not ask a specific question on regulation 6 which would insert new section 9A into the 2021 Act to impose a mandatory deadline on authorised unconnected multiple employer CDC schemes to commence operating within 18 months of the date on which the Regulator receives the application for authorisation. However, 3 respondents did comment that they felt the deadline was too short.

Government response

30. Following the near unanimous support for the inclusion of CIO in the fit and proper person requirements we have included provision relating to a CIO in the revised draft regulations. Section 11(2) of the 2021 Act would be amended to add CIOs to the list of persons the Regulator must assess is a fit and proper person to act in relation to the scheme in the capacity mentioned. 

31. The definition of a CIO (see regulation 21) ensures that external or third-party investment consultants or advisers would not generally be captured by the fit and proper person requirement as a CIO. It remains our policy approach that it is not mandatory for a scheme to have a CIO, as we acknowledge that the trustees may perform these functions in some schemes. Aside from the inclusion of a CIO we have not made any further changes to the fit and proper persons provisions.  

32. As the definition of a CIO refers to the scheme’s investment strategy, we have added a definition of investment strategy to section 49 and the index of defined terms (section 50) of the 2021 Act.  

33. We have also amended regulation 6 so that a scheme that is granted authorisation will instead have 24 months from the date on which the Regulator receives the application for authorisation to begin operating or authorisation will be automatically withdrawn, unless the Regulator is satisfied the trustees have a good reason for needing an extension of up to six weeks.

Regulations 32, 33 and 34 of and Schedule 2 to the Unconnected Multiple Employer CDC Regulations 2025: Scheme design requirement

Question 5: Does the drafting of the scheme design tests deliver the policy intention of providing a sensible measure of whether a scheme’s design is sound, at initial application and on an ongoing basis?

Summary of responses

34. There were 32 respondents who answered this question of which: 20 agreed that the scheme design tests delivered the policy intention; 11 agreed with caveats; and two disagreed. Most respondents either disagreed with or queried the requirement in regulation 8 of the draft Unconnected Multiple Employer CDC Regulations 2025 (reflected in Schedule 2, paragraph 6 of those regulations) for the viability report to be approved by the scheme proprietor.  

35. Respondents argued that ultimately the trustees should be responsible for the running of a scheme on an ongoing basis. Respondents raised the concern that the scheme proprietor could withhold their signature and assert pressure on trustees and actuaries to change the assumptions used in the viability report.

Government response

36. We acknowledge that the concern raised about an ongoing requirement for the scheme proprietor to approve the viability report is a valid one. However, we want to retain the requirement for the scheme proprietor to approve the viability report at authorisation, but not on an ongoing basis. This achieves the original policy intention to encourage co-operation between the trustees, the scheme actuary and the scheme proprietor, whilst giving trustees independence from commercial considerations and the autonomy to run schemes on an ongoing basis. 

37. Moreover, although we are removing the requirement for the scheme proprietor to approve the viability report on an ongoing basis, we want the scheme proprietor to be provided with revised viability reports and for these also to be provided on request by the scheme proprietor. 

38. We have therefore removed the drafting for section 13(5A) of the 2021 Act and instead regulation 8 inserts new section 13(7A) to require that the trustees obtain the approval of the scheme proprietor for the viability report provided to the Regulator on applying for authorisation only. 

39. Newly inserted section 13(7B) of the 2021 Act requires the trustees to also provide the scheme proprietor with any revised report within seven days of the report being revised. We have also revised paragraph 5 of Schedule 2 to the Unconnected Multiple Employer CDC Regulations 2025 (information which must be included in a viability report) to limit the requirement to provide a statement of approval by the scheme proprietor to the first viability report.

Question 6: Do you have any comments on the drafting of the actuarial equivalence test? Is it clear that the scheme actuary must use the methods and assumptions used in the most recently completed valuation to satisfy the test?

Summary of Responses

40. Of 28 respondents, 8 agreed, 9 agreed with caveats and 11 disagreed. It is worth nothing that most respondents did not directly address the second component of the consultation question. 

41. Although respondents broadly agreed with the rationale behind the actuarial equivalence test, which is to avoid excessive cross-subsidisation between members or employers, a significant number of respondents thought the test as drafted in regulation 32(9) and 32(10), in combination with the requirements in regulation 32(11), was impractical to satisfy. The main issue related to the definition of “relevant period” in regulation 32(10)(b).

42. Following further engagement, it became clear that the test, as drafted, placed an unintended and unreasonable burden on scheme actuaries to carry out complex calculations based on market conditions at a set date, without allowing sufficient time for them to do so.

43. Some respondents also raised a concern about the requirement for the expected value of the rights to benefits which are expected to accrue to be calculated using the methods and assumptions that would be expected to be used for an actuarial valuation of the scheme. Some thought this was unduly prescriptive and could limit scheme design.

Government response

44. We have considered the concerns raised about the actuarial equivalence test and we acknowledge that the test we consulted on is impractical to meet as the “relevant period”, combined with the requirements in regulation 32(11) of the draft regulations we consulted on, do not allow actuaries sufficient time to carry out the necessary calculations based on relevant market conditions.

45. We have retained the principle of actuarial equivalence, which is fundamental to ensure fairness and guard against excessive cross-subsidisation, but have addressed the practical barriers flagged by respondents by decoupling it from the provision of the viability certificate. Instead, the scheme rules of unconnected multiple employer schemes will have to include provision requiring that accrual rates are determined in a way that is actuarially equivalent (regulation 40(5)). Actuarial equivalence is achieved when the expected accrual and the expected contribution levels are equal over a period. Actuarial equivalence can be calculated at either a member or employer level and the relevant period must be agreed between the trustees and the scheme actuary (regulation 40(6)).

46. We want to provide sufficient flexibility for actuaries so that the methods and assumptions they use when considering actuarial equivalence do not have to be exactly the same as those used in an expected valuation or the most recently obtained valuation report. This is to address concerns that, if the same methods and assumptions had to be used when considering actuarial equivalence as were used in a valuation, then scheme design would be unduly limited.

47. A clear example of where actuaries might use different assumptions when considering actuarial equivalence versus the actuarial valuation is where a scheme carries out a valuation on gender specific mortality assumptions but wants to provide the same contribution/accrual rates for males and females. We have no objection to such an approach being implemented.

48. Therefore, rather than stipulate, as was consulted on, that the expected value of the rights to benefits which are expected to accrue is to be calculated using the methods and assumptions that would be expected to be used for an actuarial valuation of the scheme, we have instead taken a different approach.

49. Section 19 of the 2021 Act provides that trustees must obtain the advice of the scheme actuary before making a decision as to the methods and assumptions to be used in determining the matters mentioned in section 18(1) and (2).

50. In order to engage this provision, we have amended regulation 40(7) to require that it is for the trustees, having obtained the advice of the scheme actuary, to make a decision on which assumptions are to be used for the purposes of determining actuarial equivalence under regulation 40(5).  This is to ensure that, while the actuaries will of course provide significant advice on what assumptions are appropriate, this is ultimately determined by the trustees.

51. Regulation 41 requires that when advising the trustees of an unconnected multiple employer collective money purchase scheme in accordance with section 19(1) of the 2021 Act, the scheme actuary must have regard to any guidance concerning the calculation of benefits under the rules (including the setting of accrual rates) which is published, and from time to time revised, by a body listed in that regulation. The guidance in relation to the setting of accrual rates will be produced by the Financial Reporting Council (“FRC”). Therefore, we have included the FRC in regulation 41 so that the scheme actuary must have regard to the guidance they produce.

52. Actuarial equivalence can be achieved either at member-level (regulation 40(5)(a)) or employer-level (regulation 40(5)(b)) and scheme rules must specify which approach is being taken. Under the original approach we consulted on regulation 32(2)(d) was drafted in such a way as to prevent schemes from switching between these two approaches.

53. As we have adopted a new approach and following further engagement with stakeholders, we now consider the risk of schemes switching to be very low. In addition, it would not be straightforward for a scheme to amend their scheme rules to allow them to do so. Furthermore, if a scheme did decide to switch from, for example, the member-level test to the employer-level test and updated their scheme rules to do so, then ultimately that is fine as long as they can satisfy the Regulator they can do so in a way which does not undermine their ability to meet the scheme soundness authorisation criteria. We have, therefore, removed the draft wording that prevented switching.

54. Removing the actuarial equivalence test from regulation 34 has a consequential effect on regulation 34(2)(c). The draft regulations we consulted on required that schemes which satisfy that actuarial equivalence test at employer-level would also have to satisfy the second gateway test (in addition to the first gateway test), whereas schemes which satisfy the actuarial equivalence test at member level would not need to satisfy the second gateway test (only the first gateway test).

55. All schemes must satisfy the first gateway test and the second gateway test (on application) and the live-running test (on an ongoing basis).

Regulations 4(b) and (c), 5, 9, 10, 13 and 35 of and Schedule 3 to the Unconnected Multiple Employer CDC Regulations 2025: Financial sustainability requirement

Question 7: Do you have any comments on the draft regulations on financial sustainability?

Summary of Responses

56. There were 32 responses to this question and, despite the majority of respondents supporting this approach, most respondents raised concerns with the drafting of section 14C(3) of the 2021 Act (newly inserted by draft regulation 10) – “The second requirement is that the scheme proprietor only carries out activities that relate directly to unconnected multiple employer CDC schemes in relation to which it is the scheme proprietor or prospective scheme proprietor”. 

57. Most respondents felt this provision was overly restrictive and that the purpose of the scheme proprietor’s prohibition from other activities is unclear. A number of respondents highlighted their concern that it would cause inefficiency as it might require a separate legal entity to fulfil the role where an existing entity may already be better placed to carry out this role. Some respondents feared this would be potentially unworkable and thus limit the attractiveness of setting up an unconnected multiple employer CDC scheme.  

58. A number of respondents suggested that this issue could be resolved by offering an exemption from the requirement in section 14C(3) in certain circumstances, similar to the approach within the DC Master Trust regime provided for by regulation 8 of the Master Trust Regulations 2018.

59. 10 respondents raised that the scheme proprietor requirements potentially present an issue for sectoral or non-profit unconnected multiple employer CDC schemes and that the regulations should ensure that the requirements for a scheme proprietor can accommodate a public sector entity acting as a scheme proprietor or similar. Four respondents stated there should be some form of carve out in the regulations which would permit the trustee(s) of a non-profit scheme to be a scheme proprietor.  

60. Linked to this point, two respondents queried the extent to which the scheme proprietor had to directly hold the necessary financial resources to meet the financial sustainability requirements, believing some flexibility may be needed, by either allowing the trustee to fulfil the scheme proprietor role, or for the scheme proprietor being authorised to have access to (rather than directly holding) the required level of financial resources to meet the financial sustainability requirements.  

61. With regards to the Business Plan requirements, no respondents raised any concerns, but one respondent raised some minor drafting points raised in relation to the drafting of Schedule 1B to the 2021 Act – newly inserted by regulation 21 of the Unconnected Multiple Employer CDC Regulations 2025 - and two respondents raised a minor drafting point in relation to the drafting of Schedule 3 to the Unconnected Multiple Employer CDC Regulations 2025.

62.Although not included in the draft regulations we consulted on, we stated our intention to include provision in the final regulations to ensure a scheme proprietor (and any undertaking funding it) cannot follow a less stringent accounting regime for the purposes of these requirements by taking advantage of the exemptions for small and medium-sized businesses and certain subsidiaries under the Companies Act 2006. Only one respondent acknowledged this intention directly and welcomed it in doing so.

Government response

63. Following consultation, we have removed the proposed requirement in section 14C(3) of the 2021 Act (and the associated section 14C(9)) that the scheme proprietor only carries out activities that relate directly to unconnected multiple employer CDC schemes in relation to which it is the scheme proprietor or prospective scheme proprietor. We acknowledge it could give rise to operational complexities. For example, if an existing DC Master Trust wishes to operate a CDC scheme for its members, it would possibly need to set up a separate entity to operate the CDC scheme, this may lead to a less efficient operational structure which could reduce the overall benefit to members, for example resulting in the duplication of reporting, governance and other functions.  

64. Despite removing this provision, we have chosen not to have a corresponding exemption provision in the regulations to that of regulation 8 of the Master Trust Regulations 2018. We feel this is inefficient and overly burdensome when ultimately, we are not particularly concerned what other activities a scheme proprietor undertakes e.g. if they are also an insurer, DC funder etc. so long as they can satisfy the Regulator that they can meet the requirements and liabilities that fall upon them as a scheme proprietor.  

65. We have not sought to pursue any form of carve out in the regulations which would permit the trustee(s) of a non-profit scheme to be a scheme proprietor. It is unclear to us how such a delineation between “commercial” and “non-commercial” schemes could be achieved in legislation and it would likely need further consultation. In any case, it remains our policy position that all schemes will have business and commercial decisions to make and that this role should not be held by the trustees (or any individual trustee) given the obvious conflicts of interests that could arise. We want trustees of CDC schemes to remain focused purely on member interests and not be unnecessarily distracted by responsibilities for commercial considerations of the scheme.

66. The focus of our legislation is on the liability of the scheme proprietor to fund the scheme rather than how the financial resources are held. Therefore, subject to being able to satisfy the Regulator, the scheme proprietor may be able to evidence a legally binding agreement to have access to (rather than directly holding) the required level of financial resources when meeting the financial sustainability requirements.  

67. With regards to minor drafting points raised in relation Business Plan requirements, the paragraph number referenced in paragraph 28 of Schedule 1B of the 2021 Act (which would be newly inserted by regulation 23) has been corrected and paragraph 2(f) of Schedule 3 to the Unconnected Multiple Employer CDC Regulations 2025 has been removed as funding liabilities do not fall on the employer.  

68. Post-consultation, we also identified a gap with regards to the information required on application for authorisation in Part 1 of Schedule 3 to the Unconnected Multiple Employer CDC Regulations 2025. Paragraph 1(a) should include an additional provision for the scheme proprietor’s strategy for meeting any shortfall between the scheme’s income and the costs mentioned in section 14(2)(a) of the 2021 Act. This has now been added – see paragraph 1(a)(iv) of Schedule 3.

69. We have now drafted provisions to be inserted into section 8 of the 2021 Act (see regulation 4) to ensure a scheme proprietor (and any undertaking funding it) provide to the Regulator accounts that enable the Regulator to make the assessments it is required to make. In particular, this ensures that the accounts provided cannot follow a less stringent accounting regime for the purposes of these requirements by taking advantage of the exemptions for small and medium-sized businesses and certain subsidiaries under the Companies Act 2006 (and equivalent legislative provisions). The policy intention is that individual accounts, rather than group accounts, should be provided in order to ensure transparency and this is reflected in the drafting.   

70. As a scheme proprietor (or an undertaking funding them) could be one of many different legal structures, these provisions have been drafted in a way that is intended to cover a range of eventualities and to maintain transparency and consistency. These provisions have also been drafted in a such a way as to reflect our policy intention that the requirements for scheme proprietors and the undertakings that fund them (whether they be a UK company, Limited Liability Partnership, overseas company, qualifying partnership, non-qualifying partnership, charity or other entity) should be limited to preparing audited accounts only for the purposes of what needs to be provided for the Regulator and to avoid our regulations creating duplicative or unnecessarily burdensome requirements.

Section 14D and Schedule 1C to the 2021 Act and regulations 5, 10, 21, 29 and 46, of the Unconnected Multiple Employer CDC Regulations 2025: Promotion or Marketing Requirements

Question 8: Do you have any comments on the draft regulations on promotion or marketing?

Summary of responses

71. Of 39 respondents, 9 agreed, 27 agreed with caveats, and 3 disagreed with the draft regulations on promotion or marketing. Two of the respondents who disagreed thought that unconnected multiple employer CDC schemes should be restricted to the non-profit space where, they argue, promotion and marketing requirements are unnecessary.  

72. A significant number of those respondents who agreed with caveats noted that the definition of promotion and marketing could be interpreted broadly so that some ‘information sharing’ activities undertaken by trustees, especially if the information is positive, might be inadvertently captured by the requirements. Some respondents listed trustee activities which they considered should not be considered promotion and marketing. They include:

1. a). trustees may be expected to speak to employers as part of their due diligence process for deciding whether to participate in the scheme

2. b). trustees may be invited to speak about the scheme at industry conferences or events (which inevitably helps to raise the profile of the scheme)

3. c). trustees may make public statements about the scheme (for example, on a scheme website or in response to a particular event) to provide assurances about the way in which the scheme is run

73. It was suggested that because of the prohibition on trustees undertaking promotion and marketing in the newly inserted section 9(3)(cc) of the 2021 Act, a broad interpretation of the definition of promotion and marketing in the newly inserted section 9(7) of the 2021 Act could mean that trustees are overly cautious about undertaking the above activities. Some respondents requested a tighter regulatory definition of promotion and marketing, so that the above activities would not be captured by the requirements.  

74. Some respondents also questioned whether the prohibition on trustees carrying out promotion and marketing activities makes sense in non-profit sector-wide schemes. However, it is worth noting that two respondents disagreed with the draft provision under which schemes are not required to have adequate systems and processes for securing that promotion or marketing of the scheme is clear and not misleading if no person is carrying out promotion or marketing of the scheme.  

75. Finally, two respondents raised concerns that the regulations do not provide for a sanctions regime and that there should be strong sanctions, including financial penalties, where promotion can be seen to be knowingly misleading.

Government response

76. We want CDC schemes to be available to more savers, which is why we do not want to restrict unconnected multiple employer CDC schemes to just non-profit schemes. We consider that the definition of promotion or marketing is appropriate and also that it is appropriate to make it a criterion of authorisation that trustees do not promote or market the scheme. We are content that the Regulator’s Code can provide the necessary clarity and reassurances on how the Regulator expects to apply the promotion or marketing criteria, and, therefore, how trustee communications will be taken into account.

77. The main issue here is on whether or not the trustees are ‘inducing’ an employer to join their scheme, for example in communications about the scheme’s operation and governance (which should be factual in nature). The objective of these criteria is to mitigate the risk of unclear and misleading communications. Our effective prohibition on trustees promoting or marketing the scheme does not negate the challenge function they can have if they think there is a risk of communications being misleading or unclear, and they would be required to report to the Regulator under the significant event provisions if they thought unclear or misleading promotion or marketing had been carried out.

78. We have not made any changes to the requirement that trustees cannot undertake promotion and marketing, regardless of whether the scheme is commercial or non-profit. As we have already addressed in relation to the scheme proprietor requirements, we do not think carving out ‘non-profits’ in legislation is practical. Furthermore, whilst we think the risk of mis-selling may be lower in non-profit schemes than in commercial schemes, non-profits may still choose to promote or market their schemes and, if they do so, we would want these communications to be captured by the promotion or marketing requirements

79. We also do not think this authorisation criteria require a specific sanctions regime as we consider that the Regulator will have appropriate regulatory grip should there be a cause for concern.

80. Further review of the draft regulations raised an issue which was not raised in the consultation. We have consequently revised the definition of “promotion or marketing” in inserted section 9(7) to ensure that communications for the purposes of inducing prospective employers to use the scheme are captured.

Regulations 5, 12 and 29 of the Unconnected Multiple Employer CDC Regulations 2025: Ability to pursue continuity option 3

Question 9: Are the draft regulations clear that a trustee’s ability to pursue continuity option 3 must not be unduly constrained or fettered and how this would be evidenced to the Regulator?

Summary of responses

81. There were 30 responses to this question and all but one of them agreed with the general approach, and nearly a third of respondents either stated they felt the drafting of this authorisation criteria was clear or made no comments on the drafting. Half of the respondents, although agreeing with the policy approach, felt the regulations could be clearer and/or the Regulator’s Code would need to provide more clarity on what is expected.  

82. Six respondents felt it would be clearer that trustees of an unconnected multiple employer CDC scheme must be free to pursue continuity option 3, if the first part of section 34(5) of the 2021 Act were amended to apply only to single employer CDC schemes. Several respondents felt the reference to “follow any other process” reference in new section 17A(3)(c) of the 2021 Act was very wide and could create uncertainty as to what is meant to be caught. 

83. Four respondents raised the concern that as the list in newly inserted section 17A(3) of the 2021 Act is not framed as being an exhaustive list of the issues the Regulator may take into account, there is a risk that in future the Regulator could take into account other factors, most notably with regards to funding requirements. There was a specific concern raised that the funding requirement in relation to a triggering event in section 14(2)(b)(ii) of the 2021 Act could be considered by the Regulator when assessing whether the trustee can pursue continuity option 3 without being unduly constrained or fettered.  

84. Finally, two respondents queried whether it was envisaged that a different continuity strategy could be pursued for each separate employer participating in an unconnected multiple employer CDC scheme.

Government response

85. We think section 34(5) of the 2021 Act should apply to unconnected multiple employer CDC schemes and so no change has been made here. If an unconnected multiple employer CDC scheme did not include provision for continuity option 3 in its scheme rules, the scheme would not be authorised and so section 34 would not apply.  

86. On reflection we have decided to remove the inclusion of proposed section 17A(3)(c) of the 2021 Act because respondents advised that the reference to ‘any other process’ was too broad and thought it would create uncertainty over what processes should be covered in relation to this proposed requirement. The Regulator would still be required to take into account any processes that they consider to be constraints or fetters on a trustee in this regard.

87. We note the argument that not having the capital to cover the expenses for a scheme running on as a closed scheme would prevent the trustees from pursuing continuity option 3. However, there is an authorisation requirement that the scheme has financial resources to meet the costs of continuing to run for at least six months and must have the financial resources to meet the costs of complying with the duties under sections 31 to 45 of the 2021 Act. The scheme would therefore not be prevented from pursuing continuity option 3 in the first instance on the basis of lack of financial resources or it would have failed to meet the financial sustainability criterion. We therefore cannot see a conflict here and have made no amendments to the regulations in this regard.

Valuation and benefit adjustment

Regulations 40 to 44 of the Unconnected Multiple Employer CDC Regulations 2025

Question 10: Are the draft regulations clear on how valuation and benefit adjustments should happen?

Summary of responses

88. There were 35 respondents to this question of which 32 agreed that the provisions were clear on how valuation and benefit adjustments should happen. However, 22 of those that agreed raised concerns about aspects of the draft regulations that are covered in the following paragraphs. Three respondents disagreed, stating that the regulations were too restrictive and needed to be more flexible or that the regulations were too vague and that the multi-annual reduction provisions were impenetrable.

89. Of the 22 respondents that raised some issues with the draft regulations, two wanted the regulations to make explicitly clear that the provisions only applied to unconnected multiple employer CDC schemes and not also single or connected employer CDC schemes. 13 respondents raised significant concerns about regulation 38(4)(c)(i) stating that the drafting was unclear and did not meet the policy objective.

90. Some respondents suggested that we should not seek to accommodate tranching by employer - as intended under regulation 38(4)(c)(i) - as it would be complex and could lead to unfairness as members of different employer cohorts might end up being treated differently in terms of adjustments and that this would be challenging to explain to members.

Government response

91. Our original policy intention was to permit both unconnected multiple employer CDC schemes with designs to tranche by employers and those schemes whose designs did not include tranching by employers. The reason for intending to permit tranching was to enable unconnected multiple employer CDC schemes to allow prospective employers joining at a point of high performance to be only required to meet the scheme’s original benefit index aspiration, for example CPI. Such an approach would also negate the potential perverse situation where schemes that have successful investment strategies (i.e. are performing well) are less attractive to employers than those that performing less well.

92. Regulation 38(4)(c)(i) of the draft Unconnected Multiple Employer CDC Regulations 2025 we consulted on intended to make provision as to how ‘applying adjustments without variation’ would work in a scheme that tranched by employers. However, it is clear following consultation that the drafting would not have the intended effect or meet our proposed policy intention.

93. Respondents also flagged that the approach we consulted on did not work with the multi-annual reduction provisions. Given the issues raised about our proposed approach and drafting to accommodate applying adjustments in schemes that tranched by employers, we have decided to remove this provision. We continue to recognise the potential value of being able to tranche (or cohort) by employer in a competitive CDC market (especially in retirement-only CDC) however, and we will work with expert industry stakeholders going forward to develop an alternative policy approach to tranching that is both workable, fair and not unduly burdensome.

94. We do not consider that removing this provision will present a barrier to those schemes seeking to establish an unconnected multiple employer CDC scheme in the short term and once a new approach has been developed and drafted, we will test it through a technical consultation with key industry experts and then can seek to make a legislative change to incorporate it if needed after the Unconnected Multiple Employer Regulations 2025 come into force.

95. In the course of revising these provisions we have also made some amendments to regulation 40 to make the policy intention and drafting clearer. This includes regulation 40(4)(e) and (f). For consistency, the clarificatory changes made to regulation 40(4)(e) will also be made to regulation 17(4)(e) of the CDC Regulations 2022. In addition, and as explained previously in this document, regulation 40 now includes new paragraphs (5) and (6) and an amendment to paragraph (7).

Ongoing Supervision Framework and Continuity Options

Regulations 14 to 18, 45 to 47 of the Unconnected Multiple Employer CDC Regulations 2025

Question 11: Do you think that the significant events listed in draft regulation 44 will provide the information the Regulator needs or are there other significant events that should be added?

Question 12: Do you have any comments on the draft regulations that provide for ongoing supervision of unconnected multiple employer CDC schemes?

Summary responses

96. There were 46 responses in total to these questions; 29 responded to question 11 and 17 to question 12. All the respondents that commented welcomed the draft regulations. However, 19 respondents raised some suggested changes to the significant events provisions and a further nine proposed changes to the other supervision provisions.

97. All the respondents agreed with the significant events framework, but a number suggested some changes. These included:

• two respondents suggested creating an overarching power to enable new significant events to be added in the future 

• another respondent proposed that all the persons listed under the Fit and Proper persons requirements should be subject to notifying the Regulator about significant events 

• other respondents suggested that the removal of an employer or a change in ownership of the scheme proprietor should be new significant events 

• Several respondents did not think that a person who promotes or markets the scheme should be required to notify significant events to the Regulator. They advised that if this were the case then the following significant events could be removed – regulations 44(1)(o) and (p).

98. One respondent suggested that it would be helpful for the Regulator to provide guidance on new triggering events 7A and 7B. They also advised that despite this the amendment intended is clear in draft regulation 16.

Government response

99. On the suggestion for taking a power to add new significant events, we are satisfied that we have capability to add new significant events if they are needed. We do not agree with the proposal for persons who promote or market the scheme to not be subject to the significant event requirements. We consider that such individuals are well placed to notify the Regulator if, for example, there is a proposal to start promoting or marketing their scheme or if someone has carried out promotion or marketing that is unclear or misleading.  

100. In any case, all those listed under the Fit and Proper persons requirements will be required to notify the Regulator about significant events and we are content that we have identified those individuals who are best placed to be required to notify the Regulator.  

101. In our policy development, we did initially consider whether to add a significant event based around the exiting of an employer from the scheme, in particular a large one. However, we concluded that this was unnecessary in an unconnected multiple employer CDC scheme since it is inevitable that there will be on flows and off flows in unconnected multiple employer schemes, which may not affect the ability of the scheme to continue to operate sustainably. Our understanding is that if a sizable employer left the scheme, it may be captured under existing regulation 46(1)(g) – an event occurs which, in the opinion of a person mentioned in section 28(2) of the 2021 Act, undermines or is likely to undermine the soundness of the design of the scheme. 

102. With regards to the suggested significant event concerning the change in ownership of a scheme proprietor we do not consider this is needed. This is because a scheme’s business plan would need to be revised if there was a change in ownership. If the scheme proprietor is partly or wholly funded by the new owner, and that owner is an undertaking, then there would also be a requirement for the scheme proprietor to provide that undertaking’s accounts to the Regulator within a specified time period - see new s.26A(3) and (5) of the 2021 Act inserted by regulation 13. 

103. Having considered the responses in relation to significant events and triggering events we do not consider that any changes to the relevant draft provisions are needed. No comments were received on the implementation strategy, periodic reporting, pause orders, prohibition on increasing charges or the continuity options provisions. We do not, therefore, propose making any changes to these provisions either. The Regulator’s Code will cover ongoing supervision of unconnected multiple employer CDC schemes including significant events and triggering events.

Chapter 3: Consequential and Miscellaneous Amendments

Consequential Amendments

Regulations 58 to 77 of, and Schedule 7 to, the Unconnected Multiple Employer CDC Regulations 2025

Question 13: Do you agree with the changes in Part 6 of the draft regulations?

Summary of responses

104. There were 25 responses to this question, of which 17 simply stated that they agreed with the changes made in Part 6 of the draft regulations (i.e. consequential amendments as a direct knock-on effect relating to the Unconnected Multiple Employer CDC Regulations 2025). 

105. One respondent opposed any change in law that would allow currently guaranteed benefits to be subject to alteration without members consent. One respondent did mention they were surprised that (as set out in section 48 of Pension Scheme Act 2015) there is no independent advice requirement applied to UMES seeking to transfer out over £30,000.  

106. Additionally, there were a couple of comments regarding the Scheme Design Statement, required in regulation 29B and Part 1 of Schedule 11 of the Occupational and Personal Pension Schemes (Disclosure of Information) Regulations 2013 (“the Disclosure Regulations 2013”). One respondent suggested that this could include a summary of the viability report and another asking whether it should be updated each year (or as appropriate) to take account of new paragraph 1A of Schedule 11 to the Disclosure Regulations 2013.

Government response

107. As a result of amendments made to the Pensions Act 1995 by section 24 of the 2021 Act, any conversion of existing defined benefits into CDC benefits would be void. Regarding the independent advice requirement on transfers, we do not feel any changes to legislation are necessary at this time.

108. As was the case with the legislation for single or connected employer CDC schemes, this type of provision is new and we recognise that it will take time for advisers to develop the expertise needed to provide advice on transfers out of a CDC scheme. We will however continue to monitor this and keep this under review as the CDC market matures.

109. Since we decided that regulation 38(4)(c)(1) of the draft regulations we consulted on would be removed, this has meant that our proposed amendment to the Disclosure Regulations 2013, set out in paragraph 6(4) of Schedule 7 to the draft regulations we consulted, did not need to be made.

110. It is worth highlighting that when an individual transfer value is being calculated in an unconnected multiple employer scheme, that it should be done on an actuarial basis, in accordance with any legislative requirements and taking into account any other actuarial factors (such as age) needed to determine the individual’s share of the scheme’s collective assets.  

111. We agree that the Scheme Design Statement should be accurate and therefore should be updated where there is a change in relation to the information listed in paragraph 1A of Schedule 11 to the Disclosure Regulations 2013. This is important for transparency to ensure members, particularly prospective members and employers, are aware of the updated rate or amount of benefits provided under the scheme. We have therefore inserted regulation 29B(5A) to require unconnected multiple employer CDC schemes to update the information set out in paragraph 1A of Schedule 11, if this information changes.  

112. We would only expect the scheme rules to describe the method of how the rate or amount of benefits provided under the scheme are to be determined and do not expect the rules to include full details of the rates or amounts themselves as this would be burdensome. 

113. We have also considered expanding the Scheme Design Statement, to cover the full contents of the viability report for unconnected multiple employer CDC schemes. However, we feel that this information is too detailed for the intended general reader of the Scheme Design Statement. We feel the current content, with the new addition of paragraph 1A for unconnected multiple employer CDC schemes (how the benefits which accrue each year under the scheme relate to the contributions made into the scheme by or on behalf of members), is sufficient as a summary.

Miscellaneous Amendments

Regulations 2 to 4 of the Miscellaneous Amendment CDC Regulations 2025

Question 14: Do you agree with the changes in the Miscellaneous Amendment CDC Regulations 2025?

Summary of Responses

114. There were 19 responses to this question, of which, 15 simply agreed with the changes in the draft regulations regarding the Miscellaneous Amendment CDC Regulations 2025(i.e. other miscellaneous amendments relating to CDC). All specific comments related to the Disclosure Regulations 2013.  

115. Four respondents explicitly commented that they agreed with the removal of the transfer values in the annual benefit statement (ABS) at paragraph 5 and 6 in Schedule 6A. One, however, did suggest going further and explicitly prohibiting the inclusion of transfer values in the ABS. Another two respondents stated that the important element in the ABS was to ensure the member’s projected retirement pension illustration were retained (i.e. paragraph 20, 24 and 25 of Schedule 6A of the Disclosure Regulations 2013).  

116. One of these respondents also suggested deleting paragraph 9 of Schedule 6A as it was no longer needed if paragraphs 5 and 6 were being removed. As well as noting a minor numbering error in Regulation 8A(3) and Schedule 2.  

117. Another respondent suggested a potential need for guidance for schemes on setting principles relating to projections in the annual benefit statement for members to ensure CDC schemes were using consistent assumptions when developing projections.

Government response

118. Regarding prohibiting transfer values in the members annual benefit statement, we do not consider it is appropriate to mandate this and will leave the decision to schemes on whether they wish to provide this on a voluntary basis.  

119. We do, however, consider it sensible to remove paragraph 9 of Schedule 6A to the Disclosure Regulations as it also contains an obligation relating to “the amount that represents the value of the member’s share of the available assets of the scheme”. As we are already removing requirements relating to this amount in paragraph 5, 6 and 22 of Schedule 6A we feel this is appropriate as this information is not necessary either. The minor numbering error highlighted has also been corrected.  

120. In relation to the suggestion that guidance was needed setting principles regarding projections used in annual benefit statements to ensure consistency in the use of assumptions, we do not feel this is necessary at this current time for single or connected or unconnected multiple employer CDC schemes. Both single or connected and unconnected multiple employer CDC schemes would be better placed to set out their own assumptions based on their scheme design and membership.  

121. We will keep this under review as CDC schemes develop. Although, for transparency, it is worth noting the Disclosure Regulations 2013 do require schemes to provide their applied projection assumptions alongside the members benefit statement.

Chapter 4: Impacts

Question 15: What are the financial costs required to establish and run an unconnected multiple employer CDC pension scheme? Please outline any one-off and ongoing costs. 

Question 16: Considering the draft regulations and criteria for authorisation, could you estimate the costs of preparing the information required for authorisation?  

Please outline the extent and cost of external contractors where they may be required. 

Question 17: How many members do you consider to be a viable minimum in an unconnected multiple employer CDC scheme? 

Please also include any information you have on target scheme size and source of members. 

Question 18: Considering potential numbers of schemes, employers and members, do you have any information on the likely size and shape of the unconnected multiple employer market once established?

122. There were 19 responses to question 15, of which most respondents had not considered costs in detail. Most respondents suggested that costs will vary depending on the starting point for providers. 

123. Two respondents provided cost estimates of establishing an unconnected multiple employer CDC scheme. These estimates ranged from £1m to £4m, although one of the respondents suggested this was their lower bound estimate. Among respondents that did not provide a specific cost estimate, most expected the establishment costs to be significant. 

124. One respondent provided an estimate for ongoing costs, which they suggested would be around £1m per annum. A few respondents suggested that ongoing costs would fall over time as a scheme achieves scale.

125. The main costs noted were the actuarial and legal costs that will be incurred in establishing and running an unconnected multiple employer scheme. Other costs noted by respondents included:  

• communications  

• investment design and advice

• IT system set up

• administration costs

126. Two respondents shared concerns about high costs being met by members in the form of lower pensions.

127. There were 11 responses to question 16. Respondents that gave an estimate of costs did not explicitly reference the costs of preparing for authorisation but rather referred to a total set-up cost that included areas such as design and establishment costs, and legal and actuarial fees.  

128. Four respondents, including the two referenced in question 15, suggested a cost estimate in excess of £1m for the set-up and preparation costs of a CDC scheme, which includes costs relating to authorisation.  

129. Some respondents state it is difficult to estimate the costs of preparing for authorisation. The cost would depend on the starting point of the scheme, with schemes not already authorised as a Master Trust to expect substantial costs to pull together evidence to successfully apply for authorisation.

130. Eighteen respondents provided an answer to question 17, with most respondents suggesting that a significant number of members would be required. Respondents state that a low number of members would be necessary to make the effects of longevity pooling viable but due to the costs of establishing and running a CDC scheme, a higher number will be essential to bear the costs collectively. Most respondents answered that a minimum of around 5,000 members would be sufficient to achieve full scale. Some respondents suggested membership as low as 1,000 would be viable, whilst others suggested over 100,000 members would be necessary.  

131. Respondents focused on the minimum number of members they considered viable to run an unconnected multiple employer CDC scheme, rather than a target scheme size. Respondents also shared no views on source of members.  

132. There were 19 responses to question 18, and of those many responses included observations about the demand for CDC schemes. Most respondents report they have seen some level of demand but recognise it may take a few years for CDC schemes to become mainstream in the pension landscape. One respondent noted that they have not seen any demand from their customers.  

133. Some respondents suggest that it is difficult to assess the size and shape of the potential unconnected multiple employer market. Those that do comment on the likely size of the market suggest that as the focus is to create large scale, the market shouldn’t be looking to have more than 10 to 15 providers.

Protected groups and other comments

Question 19: Do you have: a) any comments on the impact of our draft regulations on protected groups and/or how any negative effects may be mitigated? b) any other comments about any of our draft regulations

134. There were 15 responses to question 19, and of those most respondents made comments on the impact of the draft regulations on protected groups.  

135. Some respondents shared concerns about mortality rates of different protected groups. Whilst most employees should receive a benefit equivalent to at least their own contributions, this may not be the case for those with shorter life expectancy. Members with a shorter life expectancy may obtain poor value compared to a DC scheme. Respondents suggest that providers and employers must be satisfied that under or over-representation within the mortality pool will not give rise to standing claims of indirect discrimination under Equality Act 2010.  

136. Respondents also raised that due to the CDC design there is pooling, with some groups subsidising others. This means it is plausible that members with protected characteristics may in practice subsidise other members which could lead to claims of discrimination. Respondents suggested that employers and trustees must be protected from claims of age, race and gender discrimination, or they may choose to avoid CDC provision.

137. A number of respondents mention they welcome that actuarial equivalence requirements will still permit schemes to offer the same benefits to members irrespective of their gender or marital status. 

138. One respondent referred to the importance of CDC schemes choosing Shariah compliant investment strategy. They recognised that this may give rise to sub-optimal investment for the membership as a whole or may lead to multiple investment options being facilitated (the latter of which they state is very difficult). 

139. Some respondents left other comments about the draft regulations. One respondent voiced that the scheme proprietor requirement and associated costs are likely to make a CDC unviable for them. Another respondent commented that they would like to see an alignment with FCA regulations and the Master Trust authorisation regime to give CDC schemes the best chance of succeeding.

Government response

140. The information provided in response to the Chapter 4 questions has informed the development of legislation for the Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025. Insights have also been utilised as part of the Impact Assessment which will be published alongside those regulations.  

141. In developing this policy and draft legislation the Department gave careful consideration to the potential impacts on protected groups. The concerns raised about intergenerational fairness and excessive cross-subsidisation were taken into account as we developed our policy approach and legislation.  

142. For example, we welcome the positive feedback received on the principle of actuarial equivalence we are introducing for unconnected multiple employer CDC schemes. It will be essential, as is the case with all occupational pension schemes, for unconnected multiple employer CDC schemes to be able to meet any relevant legislative requirements in the operation of their scheme including those set out in the Equality Act 2010.

List of Respondents

Association of British Insurers

Aberdeen Investments (ABRDN)

Association of Consulting Actuaries

Aegon UK

AMNT (Association of Member Nominated Trustees)

Aon

Association of Pension Lawyers

Apita UK Ltd

Aviva

Barnett Waddingham

BlackRock

Brightwell Pensions

British Private Equity & Venture Capital Association

CMS

Church of England Pension Board

The Communications Union

David D’Cruz

Eversheds Sutherland

Finance Innovation Labs

GHG Services Limited

GMB Union

Gowling WLG

Hymans Robertson

Institute of Faculty Actuaries

Isio

John Armstrong

Kevin Westbroom

Lane, Clark & Peacock (LCP)

Legal & General

Pensions Administration Standards Association

People’s Pension

Phoenix Group

Pensions and Lifetime Savings Association

The Pensions Management Institute (PMI)

PwC

Railpen

Redington

Royal Mail Group

The Royal Society for Arts, Manufactures and Commerce (RSA)

SACKERS

Slaughter and May

Society of Pension Professionals

Squire Patton Boggs

The Investing and Saving Alliance (TISA)

TPT Retirement Solutions

Transport for Manchester

UNISON

Unite

Western Pensions

Willis Towers Watson

1. The Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025 - GOV.UK ↩