Glossary · UK
What is Collective Money Purchase Scheme (CDC)?
A type of pension scheme, also called Collective Defined Contribution, that pools members' contributions and investment risk to target (but not guarantee) a stable retirement income.
Full Definition
A Collective Money Purchase (CMP) or Collective Defined Contribution (CDC) scheme is a pension design that sits between traditional Defined Contribution (DC) schemes, where each member has an individual pot and bears their own investment risk, and traditional Defined Benefit (DB) schemes, where the employer guarantees a specific pension income. In a CDC scheme, members' contributions are pooled into a single collective fund, invested and managed together, with an actuarially-set target income level reviewed periodically; because investment and longevity risk are shared across the whole membership rather than borne individually, CDC schemes aim to smooth out the extreme good and bad years an individual DC saver might otherwise experience right before or during retirement, without the employer carrying the open-ended guarantee of a DB scheme. The Royal Mail Collective Pension Plan, launched in 2023, was the UK's first authorised CDC scheme; the Pension Schemes Bill extends the CDC framework to allow multi-employer CDC schemes, opening the model to a much wider range of UK employers and their staff.