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Pensions: Collective Defined Contribution (CDC) schemes

Collective defined contribution (CDC) schemes are a new type of pension scheme in the UK. The Pension Schemes Act 2021 introduced CDCs, which are also referred to as collective money purchase schemes.

The Royal Mail Collective Pension Plan is the only CDC scheme authorised by the Pensions Regulator. It launched on 7 October 2024.

What types of pensions exist in the UK?

There are two main types of pension scheme in the UK:

• Defined benefit schemes pay a promised pension based on factors like salary and length of service. An employer, or another sponsor, guarantees the pension payments. The pension provides an income for life and may also include a lump sum.
• Defined contribution schemes do not guarantee pensions. Instead, people have a pot of money for retirement. The pot’s value can rise or fall depending on factors like investment returns and contributions made.

How are CDC schemes different?

In a CDC scheme, both the employer and employee pay into a collective fund. Like a defined benefit scheme, the CDC schemes pay members an income for life. However, unlike in a defined benefit scheme, the employer does not guarantee the pensions.

CDC schemes provide a target pension rather than a guarantee. They manage funds collectively, unlike in defined contribution schemes where people have their own pension pots. If the scheme is under (or over) funded, then the scheme can decrease (or increase) members’ pensions accordingly.

Policy development

Currently, CDC schemes are only open to single employers. Draft regulations laid on 23 October 2025 would allow multi-employer CDC schemes from 31 July 2026. The government is also consulting on “retirement CDC schemes”. These would let people with defined contribution schemes join a CDC scheme when they retire.