CDC is coming. It still needs a customer story.

Position as at 13 November 2026.

Collective defined contribution (CDC) is the first new kind of workplace pension the UK has seen in a generation. It matters most at the point a pot has to become an income.

For most people with a defined contribution (DC) pension, that point means a personal decision: buy an annuity, draw down, or blend the two. CDC offers a third route. Members pool their money, invest it together and receive a target income for life, with no individual product choice to make. The target is not a guarantee, and it can rise or fall.

The UK’s first CDC scheme, the Royal Mail Collective Pension Plan, launched on 7 October 2024.⁸ On 31 July 2026 the rules widened to let unconnected employers share a scheme.^3,5 On 3 November 2026 the Department for Work and Pensions (DWP) opened consultations on a form of CDC for people who have already built a pot.⁴

This article sets out what CDC is, where it stands, what the evidence shows so far, where the risks lie and what it means for those who advise on, provide and rely on retirement income. My argument is simple. CDC is not yet ready to replace annuities or drawdown, and it will not be until a provider brings a compelling, customer-based story to market. The open question is who tells it first, and where in the customer journey it lands.

How CDC works

In a CDC scheme, employers and members pay into one collective fund, and every member’s income is drawn from that fund for life. The promise is a target, not a fixed amount. Benefits can be adjusted so that assets match the liabilities for those target incomes, and the employer carries no ongoing investment risk.¹ Payouts are not guaranteed and move with investment performance.²

The design sits between two familiar models. Defined benefit (DB) promises a specified income and leaves the risk with the employer. DC gives members an income that depends on their own pot. CDC aims for a more predictable income than DC, while keeping risk off the employer’s balance sheet.

The table is a simplification for orientation. Real schemes vary in design, and the CDC column describes the general model.

Where the UK stands today

As at 13 November 2026 the UK has one operating CDC scheme, a live route for commercial multi-employer schemes and a first applicant awaiting approval.

A CDC scheme must be authorised before it operates. Once authorised, a multi-employer scheme is expected to start within 24 months of the application.³ TPR said in April that multi-employer schemes could be operating in early 2027, and that it was already talking to several possible entrants.² Authorisation tests fitness and propriety, systems and processes, financial sustainability and member communications.²

The third stage matters most for the retirement income market: CDC for people who have already built a DC pot. DWP’s draft proposals would place these retirement collective pension schemes inside a master trust or multi-employer CDC scheme, cap charges at 0.75% a year on the collective fund, and make them reachable first through guided retirement.⁴

Law firms reading the government’s roadmap expect the retirement rules and code in the fourth quarter of 2028, with the first authorisations possible between April and June 2029.⁵ That is later than LifeSight indicated in March, so earlier dates should be treated as out of date.

The case for CDC: what the evidence shows so far

What has happened. Royal Mail’s plan, with more than 100,000 members, applied a 6.4% increase in its first year, 2.6 percentage points above CPI inflation. The figure comes from a valuation at 31 March 2025 and was applied on 31 March 2026. Increases can rise or fall in future years. LCP, commenting on the result, was positive about it.⁶

What the models say. A peer-reviewed study by Armstrong, Dalby and Donnelly, published in March 2026, finds CDC can often smooth pensions after retirement and compare well with DC followed by an annuity.¹⁰ For a flat-accrual design like Royal Mail’s, the study says that advantage is not guaranteed. TPR’s release also cites external modelling that points to better average returns than DC.² WTW says its own analysis shows retirement CDC producing higher lifetime income than other DC options in most scenarios.⁷ These are modelled outcomes, not forecasts.

Why it might work. Four mechanisms recur in the sources:

• Pooled longevity risk, so no member has to fund for the longest possible life.
• A longer investment horizon, holding growth assets for longer.¹³
• No individual product or provider decision at retirement.
• Predictable employer costs, because the employer carries no ongoing investment risk.¹

Why it is needed. Pension freedoms have given savers wide choice, and they are using it. In 2025/26 savers took £91.2bn out of pensions, 21.7% more than a year earlier, 100,144 plans bought an annuity, and only 30.8% of plans accessed for the first time involved regulated advice.¹¹ The FCA counts plans, not people. A large unadvised group is making retirement income decisions with little support. In my view CDC, reached through guided retirement, is one way to give them a sensible starting point.

The risks and the critics

CDC’s central trade-off is real: members give up a guarantee and accept that their pension can fall. None of the points below is fatal, but each deserves a straight answer.

• Incomes can fall. Pensions can drop if assets lose value or costs rise, for example because life expectancy increases. The Financial Inclusion Commission said income cuts had caused problems in the Netherlands, though the government expected cuts to be rare.¹
• Generations can pay for each other. Armstrong, Dalby and Donnelly find that a flat-accrual design, which models Royal Mail’s, carries significant cross-subsidies, with older members near retirement gaining at the expense of younger ones. A dynamic-accrual design, which reflects the multi-employer schemes now being built, reduces the problem but does not remove it. The authors use Royal Mail as a stylised comparison, so these are inferences, not findings about the real scheme.¹⁰
• Pooling cuts both ways. Members who die younger effectively subsidise those who live longer, and some members may get less than a personal pot would give them.¹
• Leavers are a design problem. Members who transfer out receive a share of the collective fund. The tension is plain: if members with shorter life expectancy leave at full value, payments to those who stay could fall. That tension sits behind the proposals for no bulk transfers into retirement schemes without consent.⁴
• It is hard to explain. CDC is harder to communicate than DB or DC, which is why minimum communication requirements apply and TPR regulates them.²

Pension freedoms. This is the point most likely to matter to advisers and customers. Freedoms let savers take cash, flex income and pass on what is left. Hymans Robertson notes that drawdown generally allows remaining savings to be passed on, while CDC relies on pooled assets to support lifelong incomes for surviving members.¹⁴ Retirement CDC trades some of that flexibility for income that lasts as long as they do. The government says members keep a statutory right to transfer out until their benefits crystallise.¹⁵ After that, the ABI argued in its consultation response, entering CDC is effectively irreversible, with no cooling-off period.¹⁶ DWP is now minded to allow up to a year to convert to drawdown, if scheme rules provide for it.⁴ Whether that is enough protection is open, and customers should be told plainly what they are giving up.

Each of these is a design or governance question, and TPR’s authorisation tests exist to examine them. In my view the real test will be the first cut, not the first increase.

What it means for advisers, annuity providers and the at-retirement market

Retirement CDC is the version that touches annuity providers and advisers directly. Its first authorisations are not expected before April 2029.⁵

It enters through the default. Under DWP’s proposals, a default pension for members approaching retirement would normally need to include lifetime longevity protection, meaning an annuity or a retirement collective pension scheme. That does not apply where a member’s pots with a provider total under £10,000. Members cannot be forced to buy an annuity on the open market, and providers must consider whether a retirement collective scheme suits as a default.¹² On this design, annuities and retirement CDC sit side by side within default design.

The real trade is certainty against level. Hymans Robertson’s October 2026 modelling puts CDC at about 30% more income than an annuity on average. In the worst 5% of modelled outcomes, an annuity pays about 20% more. Against drawdown, CDC comes out 15% to 50% higher, depending on the risk assumed. Hymans calls these figures illustrative, not forecasts.¹⁴

Where annuity providers should look. Three points, offered as this article’s assessment rather than sourced fact:

• Timing. Annuity demand remains strong, with purchases up 13.2% to 100,144 in 2025/26.¹¹ The CDC effect lands first on workplace and master trust defaults from summer 2029, not on advised retail sales.
• Underwriting. Pooling means members who die younger subsidise those who live longer.¹ Individually underwritten annuities for people in poor health remain well matched to those customers.
• Certainty. The contractual guarantee is the dividing line. Any provider that can state it plainly, and price it, stays relevant.

Where advisers add value. Guided retirement is aimed at the unadvised majority. Advised clients will meet CDC as one more option to compare. The practical questions are:

• Can the client leave, and on what terms? DWP proposes no bulk transfers in without consent. It is also minded to allow members up to one year to convert to drawdown, if scheme rules provide for it.⁴
• What does it cost? The proposed cap is 0.75% a year on the collective fund, or a percentage charge plus a flat fee of up to £25 per member per year.¹²
• What is actually promised? Benefits are targets, and any adjustment mechanism should be explained clearly to the client.

What to watch next

Four dates will show how far CDC becomes a mainstream retirement income option.

• 15 and 22 December 2026. The consultations on retirement collective pension scheme regulations and on guided retirement close.⁴ The final shape of the default decides how much room CDC has.
• 2027. TPR considers TPT’s application. TPR has said multi-employer schemes could be operating in early 2027.²
• Third quarter of 2027. The government expects to publish its response on guided retirement.⁴
• Fourth quarter of 2028 to mid-2029. Retirement CDC rules and code, then the first authorisations between April and June 2029. Guided retirement duties follow from summer 2029 for master trusts and summer 2030 for single-employer trusts.⁵

Two further points sit outside the calendar, and both are this article’s assessment. The first is how the Royal Mail plan handles its first benefit cut, if one comes, because that will shape public trust more than any increase. The second is whether early multi-employer schemes adopt dynamic accrual and how plainly they explain uncertainty to members.

My view

I am positive about CDC, and I do not think the case is made yet. Until a provider comes into the market with a compelling, customer-based story, it is not ready to replace annuities or drawdown. The law and the regulator’s code are arriving. The story is not.

A customer story has to answer the questions a customer would ask across the kitchen table. What do I get, and how sure can I be of it? What can move, and by how much? What do I give up compared with my freedoms today? What happens if I change my mind? Why is this better for someone like me, and who is it not for? An annuity can answer the first question in one line. Drawdown answers the freedom question in one line. CDC has to answer all of them plainly, and no provider has yet done so in public.

Whoever does it well will decide whether CDC becomes a mainstream option or stays a specialist tool. For advisers and providers, the sensible next step is to learn how the proposed default would work, watch the consultation outcomes and decide where their own proposition fits. Until then, annuities and drawdown remain the benchmarks CDC has to beat.

Key terms

CDC (collective defined contribution). A pension where members pool contributions and investments and receive a target income for life that can be adjusted.

DB (defined benefit). A pension promising a set income in retirement, with the risk carried by the employer.

DC (defined contribution). A pension where the pot depends on contributions and investment performance.

RCPS (retirement collective pension scheme). A proposed form of CDC for people who have already built a DC pot.

Guided retirement. A structured pathway to help members make decisions at retirement.

TPR. The Pensions Regulator, which authorises and supervises CDC schemes.

References

All pages accessed 13 November 2026.

1 House of Commons Library. Pensions: Collective Defined Contribution (CDC) schemes. Research briefing CBP-8674. 6 November 2025. https://commonslibrary.parliament.uk/research-briefings/cbp-8674/

2 The Pensions Regulator. New TPR code for CDC schemes. Press release, 29 April 2026. https://www.thepensionsregulator.gov.uk/en/media-hub/press-releases/2026-press-releases/new-tpr-code-for-cdc-schemes

3 The Pensions Regulator. Collective defined contribution code of practice: introduction. In force 31 July 2026. https://www.thepensionsregulator.gov.uk/document-library/code-of-practice/collective-defined-contribution/introduction

4 Sackers. DWP consults on guided retirement policy and retirement collective pension schemes. 4 November 2026. https://www.sackers.com/publication/dwp-consults-on-guided-retirement-policy-and-retirement-collective-pension-schemes/

5 Travers Smith. What’s happening in pensions, issue 124. 20 August 2026. https://www.traverssmith.com/knowledge/knowledge-container/whats-happening-in-pensions-issue-124/

6 Pensions Age. Royal Mail CDC scheme delivers pension increase of 6.4% in first year. March 2026. https://pensionsage.com/pa/Royal-Mail-CDC-scheme-delivers-pension-increase-of-6-4-in-first%20year.php

7 WTW. LifeSight confirms intention to launch retirement CDC solution. 24 March 2026. https://www.wtwco.com/en-gb/news/2026/03/lifesight-confirms-intention-to-launch-retirement-cdc-solution

8 Professional Pensions. Royal Mail launches UK’s first CDC pension scheme. 7 October 2024. https://www.professionalpensions.com/news/4367116/royal-mail-launches-uks-cdc-scheme

9 TPT Retirement Solutions. News and insights, 4 November 2026. https://www.tpt.co.uk/news-insights/

10 Armstrong, Dalby and Donnelly. Intergenerational cross-subsidies in UK collective defined contribution funds. Annals of Actuarial Science, March 2026. https://www.cambridge.org/core/journals/annals-of-actuarial-science/article/intergenerational-crosssubsidies-in-uk-collective-defined-contribution-funds/22925E8DBDBDB17379FA8359090A00A8

11 Financial Conduct Authority. Retirement income market data 2025/26. September 2026. https://www.fca.org.uk/data/retirement-income-market-data-2025-26

12 Mayer Brown. UK government announces consultations on resurrecting pensions. November 2026. https://www.mayerbrown.com/en/insights/publications/2026/11/uk-government-announces-consultations-on-resurrecting-pensions

13 AI-CIO. TPT to launch UK’s first collective DC multi-employer plan. 4 November 2026. https://www.ai-cio.com/news/tpt-to-launch-uks-first-collective-dc-multi-employer-plan/

14 Pensions Age. CDC income uplift figures risk ‘oversimplifying’ retirement outcomes. 28 October 2026. https://www.pensionsage.com/pa/CDC-income-uplift-figures-risk-oversimplifying-retirement-outcomes.php

15 Department for Work and Pensions. Government response to the public consultation on draft legislation to amend the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991. Updated 3 June 2026. https://www.gov.uk/government/consultations/retirement-collective-defined-contribution-pension-schemes/outcome/government-response-to-the-public-consultation-on-draft-legislation-to-amend-the-occupational-pension-schemes-preservation-of-benefit-regulations-19

16 Association of British Insurers. Response to the Retirement Collective Defined Contribution pension schemes consultation. 4 December 2025. https://www.abi.org.uk/globalassets/files/consultation-papers/public/2025/12/abi-response-to-retirement-cdc-consultation.pdf

General information only. Sea to Sea Consulting Limited is not a regulated business and this is not financial advice. Views are those of Sea to Sea Consulting Limited. © 2026 Jonathan McCaffrey, Director, Sea to Sea Consulting Limited. Owned exclusively by Sea to Sea Consulting Limited.

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