The new Collective Defined Contribution pension (CDC) scheme could be launched as soon as next year, it has been announced.

It comes after regulations were laid in Parliament this week, paving the way for Government approval.

Under existing laws, all pensions are either Defined Benefit (DB), which is linked to salary or length of service, or Defined Contribution (DC), based on how much is paid in by the employee.

But the new CDC pension scheme will allow both the employer and employee to pay into a collective fund, with pensions paid out from this shared pot.

This could offer businesses predictable costs and protection against economic shock, such as that caused by the coronavirus pandemic.

Royal Mail and the Communication Workers Union are expected to be among the first to switch to a CDC scheme when it gains approval.

The latest research, meanwhile, suggests that one in five (21 per cent) businesses would be interested in exploring CDC schemes for their own companies.

Commenting on the new scheme, Minister for Pensions, Guy Opperman, said: “I am very pleased that these schemes will soon be able to operate in Great Britain.

“We have seen the positive effect of these schemes in other countries – and it is abundantly clear that when they are well-designed and well-run they have the potential to provide a positive outcome for savers, and can be resilient to market shocks.

“I have no doubt that millions of pension savers will benefit from CDCs in the years to come.”

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