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Over three-quarters of pensions decision-makers plan to explore CDC in next three years, data finds

Among companies with fewer than 250 employees, 51% expect to consider CDC in the next three years. 

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Over three-quarters of pensions decision-makers plan to explore CDC in next three years, data finds
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More than three quarters of UK pensions influencers and decision-makers said they plan to look at collective defined contribution (CDC) options in the next three years, Gallagher’s CDC report found. 

Around half of respondents said they were comfortable being early adopters. 

Among companies with fewer than 250 employees, 51% expect to consider CDC in the next three years. 

This figure rose to over 80% for larger companies.

Respondents said clearer regulatory guidance, proven results from early adopters and positive feedback from unions or employee representatives would boost their confidence.

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Andre Clarke, senior vice president, investment consulting at Gallagher, said: “In a very short period, the conversation around CDC has moved forward at blinding speed. 

“The Royal Mail scheme gave the UK market its first live example. 

“It is no longer possible to think of CDC as a niche actuarial idea; it is stepping into the spotlight, demanding close attention.”

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Clarke added: “However, our research paints a more nuanced picture. There’s a clear difference between exploring CDC as an option and taking the steps to introduce it into an existing benefits package. 

“Employers and trustees want to see more test cases, and they want greater clarity on regulation and delivery. 

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“Then they want to understand what it really means for their specific workforce.”

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He said: “It is here where an experienced consultant can help firms assess their options in the CDC market and decide which arrangements could suit their workforce best.”

More than half of respondents said they would be most likely to consider a multi-employer or master trust CDC arrangement, compared to 34% who would favour a single-employer model. 

Sector-wide arrangements saw significant interest, with 86% saying they would find a sector-wide CDC scheme appealing.

Nearly a third of respondents said they preferred whole-life CDC, compared to 22% who favoured retirement-only arrangements. 

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The largest group (36%) said both models were equally appealing.

David Piltz, chief executive officer of Gallagher’s benefits & HR consulting division, said: “For decades, employers and pension professionals have struggled with one question: how can we offer good retirement outcomes for employees without putting too much risk on the balance sheet? 

“A Collective Defined Contribution scheme offers a potential alternative. 

“It is an aspirational model, and one that could offer more predictable outcomes than a traditional Defined Contribution scheme and without the high-risk guarantees of a Defined Benefit plan.”

Piltz added: “The challenge is converting that interest into adoption. If a firm is unsure about CDC, it’s likely due to a mix of factors: a low number of test cases, competing business priorities, and a hesitance to step out first. 

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“The science, regulations, and guidance are in place, but the industry needs to communicate CDC in a way that everyone can understand. 

“That is the only way that the sector will translate the growing interest into this emerging area into real and tangible action.”

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