Retirement incomes could increase by as much as 60% as Government green-lights 'collective' pension schemes
Source: gov.uk (2025-10-21)

Millions of workers across the UK could see their pensions increase by up to 60% as new regulations for Collective Defined Contribution (CDC) schemes are set to be laid.

- Millions could benefit from new regulations set to deliver lifelong income security
- Research shows Collective Defined Contribution schemes could boost retirement incomes by up to 60% while providing more security
- Government is reforming the pension system as part of its Plan for Change to ensure higher retirement incomes and stronger economic growth.
Unlike Defined Contribution (DC) schemes, CDCs pool pension schemes into a collective fund giving workers regular pension payments for life, more security and higher average retirement incomes throughout retirement when compared to individual pension pots.

The new regulations will allow the expansion of CDCs to more employers and will address a growing demand among workers to receive a more secure retirement income. Research shows almost three-quarters of people with DC schemes want a guaranteed income from their pension despite 50% of pots currently being taken out as a lump sum.

As well as boosting the retirement living standards of today’s workers, pooling funds enables schemes to make bigger investments in assets such as UK businesses and infrastructure projects. This will help boost the economy – as seen in countries such as Canada and Denmark who already have CDCs – and support the Government’s Plan for Change to drive economic growth and improve retirement outcomes for millions of savers.

Minister for Pensions Torsten Bell said:

Too often people approaching retirement are left navigating complex choices and shoulder risks they shouldn’t have to face alone.

Collective pensions offer savers a new option that in many cases will be a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.

By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last and they can enjoy their retirement.

Ahead of the regulations being laid tomorrow, Minister for Pensions, Torsten Bell, will be delivering a speech to hundreds of key employers across the UK later today setting out the benefits of CDC schemes and the next steps to implementing them.

The move builds on the progress made by the UK’s first CDC scheme, the Royal Mail Collective Pension Plan which has over 100,000 members and reflects growing demand for pensions that deliver a lifelong income.

Director of the CDC Forum David Pitt-Watson said:

This is a major step forward for pension provision in Britain. If employers who sponsor pensions follow through, it will mean private sector workers, as well as those in the public sector, have an effective pension which will last them until the day they die.

The Government is also today launching a consultation on ‘Retirement CDC’ which would allow people who have saved into a DC scheme to transfer their pension pot into a CDC scheme at retirement.

The aim of this is to see more people receive a regular income for life that aims to keep up with rising prices without having to worry about managing their retirement money themselves or working out how long their savings need to last.

Single employer CDC regulations were a landmark moment in the UK pensions market. The Government is taking decisive action on calls from industry to expand CDC to more employers with the view that millions of more workers will be able to access the many benefits CDCs offer. On top of this, creating retirement CDCs would be an additional innovation allowing more people to enjoy the perks of CDC.

This builds on reform already underway to create better pensions for tomorrow’s generation. This includes the Pension Schemes Bill, which could boost a workers’ pension by £29,000, and the revival of the Pensions Commission to ensure tomorrow’s pensioners are not poorer than today’s.

Zoe Alexander, Executive Director of Policy and Advocacy, Pensions UK, said:

Multi-employer CDC schemes have the potential to boost retirement savings by sharing risks between savers. Success depends on striking the right balance between strong protections for members, simplicity and fairness of scheme design. We agree with Government that innovation in CDC carries huge promise for savers and are pleased that this Government is supporting the development of both multi-employer and at-retirement CDCs.

Nausicaa Delfas, CEO, The Pensions Regulator, said:

We are all working towards turning a savings system into a pensions system which provides a sustainable income through later life. Innovative solutions like retirement-only CDC schemes could play a part in this, and I’d encourage people to get involved with the upcoming consultation to ensure their ideas are heard.

Pretty Sagoo, Managing Director of Defined Benefit Solutions, Just Group, said:

At a time when pensions policy is enjoying long-overdue attention, the government’s exploration of ways to further improve retirement income is welcome. Most DC savers expect their pension to provide the income needed to help them achieve financial security in retirement. Retirement CDC could be a valuable answer to that challenge for some schemes and scheme members, in addition to other solutions that are already available or are coming to this market.

Jane Kielty, UK CEO, Aon, said:

We are very pleased to host Torsten Bell MP, at Aon’s London offices for the CDC Forum launch. Aon is a long-standing promoter of CDC’s development in the UK – dating back to 2013 – and we have been actively involved in shaping the whole‑life multi‑employer CDC regulations to be announced today. We believe that these regulations will open the floodgates for all employers - and therefore over 25 million workers in the UK - to have the opportunity to use their defined contributions to build up a pension during their working lives.

Chintan Gandhi, Partner and Head of Collective DC, Aon, said:

These regulations are a huge step for UK CDC. They will open up the market to multi-employer whole-life CDC schemes, including those provided by master trusts, enabling them to meet the needs of all employers and the self-employed – regardless of the size of their workforce or their contribution budgets. In offering employees whole-life CDC, employers’ and employees’ defined contributions can be pooled, together with investment and longevity risks being shared across the entire scheme membership. Crucially, whole-life CDC provides employees with an income for life in retirement that is expected to keep pace with the cost of living, and without individual employees needing to make complex decisions. It’s also exciting to see the emergence of a vision for retirement CDC which paves the way for all retirees - regardless of how they’ve built up their pension saving - to access the benefits of CDC when they retire.

Andy O’Regan, Chief Client Strategy Officer, TPT Retirement Solutions, said:

The publication of multi-employer Collective Defined Contributions (CDC) regulations marks a major leap forward for the UK pensions industry. For the first time, employers of all sizes will be able to access the benefits of Collective DC provision, paving the way for better outcomes for members and greater scale in this new model. The new rules will allow more workers to receive incomes for life in retirement, avoiding the need to make difficult decisions, while employers will maintain the cost certainty they have with DC provision. Earlier this year, we announced our intention to launch a multi-employer CDC scheme – just days after Pensions Minister Torsten Bell set out the timeline for this new legislation. Currently, the UK has just one single employer CDC scheme, so we’re proud to be leading the next wave of pension innovation in the UK. We are also pleased to see that government has today published its plans on retirement CDC for consultation. Unlike the whole-life model, CDC in decumulation does not pool investment risk in accumulation, but it does take advantage of longevity pooling in a similar way, to provide a lifelong income in retirement. As such, this model could be of particular interest to DC schemes which will be required to offer members a ‘guided retirement default’ in future years. We will continue to engage with government to help shape the regime for this model.

Additional Information
- Today’s event is significant for the Government:
- We will lay in Parliament regulations to allow Unconnected Multiple Employer Schemes (UMES), and we will publish the Government response to the consultation on those regulations.
- And we will also launch a consultation on policy for Retirement CDC schemes.
- We anticipate that the framework for Retirement CDC will be built on the UMES framework, which has been developed over time through multiple consultations – with broad support.
- Much of this policy consultation will therefore focus on the mechanisms by which members would join Retirement CDC schemes, ensuring they are told the right information, at the right time, and are priced fairly and in a way which ensures the stability of the overall scheme.
- Across a range of studies, these show CDCs could deliver stronger benefits in retirements, with one recent study estimating an income up to 60% higher than the income available through annuity purchase.
- A range of studies have estimated large benefits, including from Willis Towers Watson, PPI, and Government Actuary’s Department. Further details on the reports are included in the Department’s Impact Assessment published alongside the legislation.