Major Pension Reform Set to Boost Retirement Incomes by 60%
The Labour Party government has given the official green light to a significant expansion of pension rules, a move that research indicates could boost retirement incomes by an impressive 60%. The reform centres on the introduction and wider availability of Collective Defined Contribution (CDC) schemes, which promise to deliver greater financial security for pensioners.
How Collective Pensions Offer More Security
Unlike traditional individual pension pots, CDC schemes operate by pooling pension savings into a single, collective fund. This collective approach allows for risks to be shared among all members. The result for workers is a more predictable and secure retirement, featuring regular pension payments for life and, on average, significantly higher retirement incomes throughout their later years.
The new regulations, announced on 12 November 2025, will specifically allow the expansion of these CDC schemes to a much broader range of employers. This change directly addresses a growing demand from UK workers who are seeking a more stable and reliable income in their retirement.
Government and Industry Backing for Pension Innovation
Torsten Bell, the Labour Party's Minister for Pensions, strongly endorsed the new framework. He stated that the current system often leaves people approaching retirement to navigate complex choices and shoulder risks alone. "Collective pensions offer savers a new option that in many cases will be a better deal," Bell said, "one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life."
The sentiment was echoed across the pensions industry. David Pitt-Watson, Director of the CDC Forum, hailed the move as a "major step forward for pension provision in Britain," potentially granting private sector workers the same effective, lifelong pension security often associated with the public sector.
Zoe Alexander of Pensions UK noted the potential of multi-employer CDC schemes to boost savings through risk-sharing, while Nausicaa Delfas, CEO of The Pensions Regulator, emphasised the broader goal of turning the UK's savings system into one that provides a "sustainable income through later life."
Pretty Sagoo from Just Group welcomed the government's exploration of ways to improve retirement income, noting that retirement CDC could be a valuable answer for many savers expecting financial security in their later years.
