The Pensions Regulator has sets out its plans for how the new collective defined contribution (CDC) schemes should be regulated.
This draft codes comes ahead of changes which will see trustees be able to apply for authorisation to operate a CDC scheme from August this year. TPR is consulting on these proposals for its new code of practice, which will cover both the authorisation and supervision of these schemes. The industry has eight weeks to respond.
This code reflects regulations published by the Department of Work and Pension in December. It outlines how trustees can apply for authorisations, and how TPR will asset schemes, and how TPR will assess schemes against authorisation criteria both at the initial application stage and through ongoing supervision.
TPR’s executive director of regulatory policy, David Fairs says: “CDC schemes have the potential to change the pensions landscape by offering savers and employers a viable alternative to traditional defined benefit and defined contribution schemes.
“As a regulator we welcome innovation but we remain committed to protecting savers. We are confident our draft code sets the right bar for authorising and supervising CDC pension schemes that have demonstrated how they meet the criteria.
“The draft code focuses on requirements that employers and trustees considering establishing a CDC scheme need to plan for now. We will be revisiting the code to expand on our expectations for the closure or wind up of a scheme in due course. We will also be producing accompanying guidance.
“While initially CDC schemes will be limited to those set up by single employers, or two or more connected employers, the Pension Schemes Act 2021 contains powers to enable further developments of the CDC market, such as multi-employer schemes. We look forward to working with the DWP and industry on any development and expansion of CDC schemes.”
The Pension Schemes Act 2021 introduced an authorisation and supervision regime to ensure only CDC schemes that are well run and built on sound foundations can operate and that TPR has powers to intervene when necessary. This eight-week consultation runs until Tuesday 22 March.