In a recent podcast LCP’s Sam Cobley asks the question: “How many whole-of-life CDC pensions will we get this year?”

No one will know that until early 2027. The Pensions Regulator authorises the first unconnected multi-employer CDC schemes and we have not yet seen the final, adjusted CDC code. The door for authorisation opens on August 3rd and TPR has six months to say yes or no!

What we do know is that two organisations were making ready to launch such a CDC scheme – TPT and the Church of England—and now there are three. The third is a mutual—the Pensions Mutual—and it came into being at the start of March. Unlike the others it is dedicated solely to being the proprietor of a CDC for employers who want their pensions run as collective pensions with defined contributions. We are a CDC pension proprietor, starting afresh.

The boards of the Mutual and of the Pension Scheme are being established. We will announce our executive teams and also announce a board of trustees.

Like others we will need to show ourselves competent and solvent, have a business plan, and have employers ready to work with us.

So why do we believe we should become one of the few CDC schemes likely to be available to employers from the beginning of 2027?

Well, we think the answer lies in our title “Pensions Mutual.” You become a Mutual by registering with the FCA and agreeing to rules that ensure those who join the Mutual benefit from it. We intend to distribute a significant proportion of the profits made by the CDC Scheme to the participating employers, rather like farmers who get paid by a co-operative dairy for the milk they bring to it over the year.

A transparent business model for the Mutual will be matched by the Scheme which will work from an income fixed as a percentage of assets managed. This will be decided by the first group of employers; it is likely to be between 0.5% and 0.6%. It may be odd to put matters such as charges out for discussion but like our selected trustees and our strategy of turning contributions into pension we will listen to those who work with us.

Chris Bunford, our actuary, has made it clear that we will operate dynamic pricing – where this conversion of cash into pension will be influenced over time by the market returns achieved by investments and by the length of time our members and their spouses live. We see “fairness” as our primary actuarial driver.

Similarly, the management of our money will be influenced by our employers; some of whom will be experienced and wish to input while the majority will rely on the trustees and our CIO. It may well be that some employers wish to have their employees in their own section and we will be open to such discussions.  There are advantages to sharing and sometimes there need to be strategies that meet the needs of an employer and staff.

Finally, but most importantly, we cannot think of any stakeholder as more important in a mutual than its members each of whom must be treated with the same fairness and offered genuine value for their money. Nowadays, offering an app to give information is not an option; it is an absolute requirement. I can think of no financial service I am a part of that does not give me access to information and to transactions on my phone. We want members to know not just how they are doing but how they are doing compared with other options.

The promotion of Pension Mutual’s CDC Scheme to employers will also be digital, we expect you are reading this on a screen. We expect it will be supported by unions whom we consider keen advocates of both CDC and mutuality.

Our pitch to employers will be simple: “better pensions at no extra cost”, though we will advocate greater contributions when they can be afforded. We consider transfers in of pension pots important but we also consider fair CETVs critical to confidence among members. Our pitch to members will be identical to that to employers, we intend members to get inflation linked pensions at up to 60% enhanced levels compared to a guaranteed annuity.

Not everyone can afford the flexibility of drawdown or a costly annuity.  CDC is a better way for ordinary people to get “deferred pay”. We want to make retirement affordable for many more of us.