A collective approach to delivering retirement income
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Collective Defined Contribution
A CDC scheme pools employer and employee contributions into a single collective fund. Rather than building individual retirement pots, members accrue a target pension income, payable for life, which is not guaranteed and may rise or fall over time.
CDC does not rely on employer guarantees or external insurance. Instead, investment and longevity risks are managed collectively within the scheme, allowing members to smooth outcomes and benefit from scale.
Capital at risk
Marketing Material
Retirement planning is becoming increasingly more complex.
People are living longer. And the responsibility has shifted from employers to individuals.
It’s no surprise that more and more savers are asking a simple but worrying question: Will my pension last?
This is where Collective Defined Contribution, or CDC, comes in.
Traditional Defined Contribution, better known as DC schemes, provide fixed contributions but can leave outcomes uncertain.
Defined Benefit, or DB schemes, promise income but require flexible employer funding which can vary from scheme to scheme.
Well, CDC sits in between.
It combines the best elements of these two scheme types by taking fixed contributions, pooling them in a shared pot, and linking them to targeted – not guaranteed – pensions in retirement.
By sharing investment and longevity risks across the scheme, it can reduce individual guesswork and remove the need for costly external guarantees.
The result? Potentially more predictable outcomes for members and more cost stability for sponsors.
Across Denmark, the Netherlands and Austria, hybrid CDC models have been in place for years.
The UK has recently joined the CDC wave, with the first scheme launched in 2024, and broader multi-employer CDC regulations introduced in 2025.
The bottom line: CDC is one of the most interesting structural innovations in pensions today – designed to bring stability, scale and long-term thinking back into retirement income.
Managing retirement decisions alone is hard, but with CDC aiming to bring more predictability and simplicity to pensions – we are excited by the road ahead.
Disclosures
Risk Warnings
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
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This is marketing material
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The New Pension Innovation Reshaping Retirement
As people live longer and retirement becomes more complex, many are asking whether their pension will last. In this episode of #BLKBottomLine, we explore Collective Defined Contribution (CDC)—an emerging model that pools risks to deliver a target income for life, now launching in the UK.
CDC in Practice
The Case for CDC
Long‑term growth orientation
CDC schemes are designed around the aggregate life expectancy of the membership, including through retirement. This supports a longer effective investment horizon and enables portfolios to maintain exposure to growth assets for longer.
In contrast to traditional DC strategies—where portfolios are progressively de‑risked as individuals approach retirement—CDC can:
- Sustain a higher allocation to return‑seeking assets
- Access diversification and return premia, including in private markets
- Support stronger long‑term return expectations
Over time, maintaining growth exposure for longer can materially improve retirement outcomes.
Risk sharing and investment pooling
Higher expected returns may come with higher volatility. CDC mitigates this by adjusting future pension growth above or below inflation, spreading the volatility over the future expected life rather than concentrating risk at retirement.
Outcomes are expressed as a target pension value, reviewed regularly through actuarial valuations. Adjustments to the pension - both positive and negative—are applied equally across all age cohorts of the scheme ensuring equity and preventing the build up of surplus or deficits in the scheme.
Collective management of longevity risk
Longevity risk—the risk of outliving savings—is one of the most significant challenges in retirement.
CDC schemes address this through longevity pooling. Assets from members who die earlier than expected remain in the scheme to support those who live longer.
As a result income for life can be delivered:
- without the individual managing payments themselves
- without the cost of insurance guarantees
A clear understanding of risks, alongside strong oversight and alignment between investment and actuarial assumptions, is essential.
What CDC could mean for retirement outcomes
Our six-part video series breaks down how collective models could help close the retirement income gap—providing practical insight for those navigating the evolving pensions landscape.
Explore:
- Why CDC matters
- How it works in practice
- Lessons from global markets
- What trustees need to consider
Rewiring retirement Podcast
UK Pensions in Transition: Will CDC Transform UK Pensions?
