The Labour government has announced a major overhaul of the UK pension system, with new regulations that could see retirement pots for millions of workers increase by as much as 60 per cent.
What are Collective Defined Contribution Schemes?
The cornerstone of this reform is the expansion of multi-employer Collective Defined Contribution (CDC) pension schemes. Unlike traditional defined contribution pots where individuals bear all the investment risk alone, CDC schemes pool members' savings and share both risks and potential rewards collectively.
This change addresses growing consumer demand for more predictable retirement income. Recent research revealed that nearly three-quarters of people with standard DC pensions want a guaranteed income from their savings, despite half currently taking their entire pot as a lump sum at retirement.
Industry and Government Reaction
Pension Minister Torsten Bell welcomed the move, stating: "Too often people approaching retirement are left navigating complex choices and shoulder risks they shouldn't have to face alone. Collective pensions offer a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life."
The announcement on 12 November 2025 has been broadly welcomed across the pensions industry. David Pitt-Watson, director of the CDC Forum, described it as a "major step forward for pension provision in Britain" that could provide private sector workers with effective pensions lasting their entire retirement.
Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, highlighted that multi-employer CDC schemes "have the potential to boost retirement savings by sharing risks between savers," while emphasising the importance of strong member protections.
The Future of UK Pensions
The reforms will allow the expansion of CDC schemes to more employers of all sizes, addressing a critical gap in the current pension landscape. The government is also consulting on 'retirement-only' CDC options, providing further flexibility for those approaching retirement age.
Nausicaa Delfas, CEO of The Pensions Regulator, noted that "we are all working towards turning a savings system into a pensions system which provides a sustainable income through later life," with innovative CDC solutions playing a key role in this transformation.
Industry leaders from Aon and TPT Retirement Solutions have described the regulations as a "huge step" and "major leap forward" that will pave the way for better member outcomes and greater scale in this new pension model.
