How is CDC different from DC pensions?

CDC schemes offer a collective investment approach and aim to provide a stable income in retirement. DC (Defined Contribution) pensions are individual savings pots where members choose how to invest and draw down their money.

Is CDC fair for all members?

Fairness in CDC schemes depends on good design. LCP advises using age-related conversion rates and timely sharing of scheme experience to ensure fairness across generations.

Can CDC and DC work together?

Yes. CDC and DC can be complementary, offering different income patterns in retirement to suit diverse saver profiles and needs.

Will CDC pensions give me a better retirement income than DC?

LCP modelling suggests CDC pensions could deliver up to 50% higher income compared to traditional annuities and 15-25% more than high-conviction DC drawdown strategies.

Is communication easier in CDC or DC pensions?

DC pensions potentially require more frequent and personalised communication to support member decisions. CDC communications focus on building trust and helping members understand their expected benefits.

The future of pensions: A comparison of DC and CDC solutions for future savers

Pensions & benefits Pensions & benefits CDC strategy and implementation DC pensions Corporate strategy

Key insights

With new multiemployer CDC schemes and innovation in DC, now is an essential time for sponsors to review future pension arrangements for their savers.

CDC could deliver savers up to 50% more income in retirement compared to traditional annuities. But innovations in DC drawdown strategies may bridge half or more of that gap.

This means wider factors such as needs in retirement, fairness, communications and member experience are also key. What is best for your savers?

How innovation in DC and the arrival of CDC schemes could reshape the future of pensions, and what it means for your savers

This report explores how pension provision is evolving for the next generation. With Defined Contribution (DC) now the dominant model and Collective Defined Contribution (CDC) entering the UK market, sponsors and trustees must rethink what “good” looks like in retirement.

The report compares CDC and DC across five key areas: member outcomes, fairness, communication, ease of retirement, and meeting individual needs. It offers a practical framework to help decision-makers choose the right solution for their workforce.

The future of pensions

Read the report

We are now at an inflection point. CDC is now part of the pensions landscape and sponsors are asking how their employees can benefit from higher expected pensions. At the same time regulations are driving improvements in DC. Time is of the essence for sponsors to examine which will work best for their savers and decide what is their “future of pensions”.

Steven Taylor Partner and co-author of the report

Your questions answered

: CDC schemes offer a collective investment approach and aim to provide a stable income in retirement. DC (Defined Contribution) pensions are individual savings pots where members choose how to invest and draw down their money.

: Fairness in CDC schemes depends on good design. LCP advises using age-related conversion rates and timely sharing of scheme experience to ensure fairness across generations.

: Yes. CDC and DC can be complementary, offering different income patterns in retirement to suit diverse saver profiles and needs.

: LCP modelling suggests CDC pensions could deliver up to 50% higher income compared to traditional annuities and 15-25% more than high-conviction DC drawdown strategies.

: DC pensions potentially require more frequent and personalised communication to support member decisions. CDC communications focus on building trust and helping members understand their expected benefits.