Pension experts weigh collective retirement plans
Nearly half of UK pension professionals are looking into retirement collective defined contribution (CDC) schemes, though most remain at an early stage of understanding. A survey by WTW revealed this trend.
The poll showed 49% of professionals were considering CDC options, but their familiarity varied widely. About 31% knew of the concept but had not moved beyond initial research. Another 18% described their knowledge as fair or had examined it more closely.
Many still struggled to see how CDC could work in practice or improve retirement offerings. WTW pointed out this gap suggested a need for more education in the market.
Meanwhile, 39% were evaluating “fix then flex” retirement solutions, which blend guaranteed income with spending flexibility later in life.
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When choosing default retirement options, 30% of professionals ranked stable income as the top priority. Simplicity for members came next at 28%, while 23% wanted higher expected income.
Shriti Jadav, a scheme actuary at WTW, said CDC could help schemes provide steady income throughout retirement. The findings indicated that while many in the industry were still early in their exploration, demand for reliable income solutions was growing.
Jadav noted schemes wanted options members could grasp without facing complex decisions alone.
Pieter Steyn, WTW’s head of UK pensions investments, explained that stable income did not require sacrificing returns. CDC keeps assets invested collectively for longer, sharing risks across members instead of leaving individuals to manage them. The larger scale and extended investment horizon allow broader growth asset exposure, which may improve long-term results while supporting the productive finance agenda.
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A significant 78% of professionals planned to review their defined contribution (DC) provision soon, with only 2% ruling out changes. The rest were uncertain, signaling an active market for future retirement solution discussions.
CDC schemes differ from traditional DC plans by pooling assets and risks among members rather than forcing individuals to handle investments and longevity risks alone.
The survey highlights a shift in the pensions industry toward solutions that offer both flexibility and security. Savers increasingly want predictable income without the constraints of traditional annuities.
For now, education and assessment remain key. Trustees and sponsors are being encouraged to weigh available options to find what best suits their members—whether CDC, “fix then flex,” or other emerging approaches.
