Deadline closes on TPR Consultation on multi-employer CDC code of practice

Commenting as deadline approaches for TPR's Consultation on the new multi-employer CDC code, Paul Waters, Head of DC Markets, Hymans Robertson, said:

"We welcome The Pensions Regulator’s move towards a single, consolidated Code of Practice for CDC. A unified code covering both single employer and multi employer CDC should be easier to maintain over time and provides a clearer framework as the market develops. It's also good to see TPR provide a significant level of detail that will enable proprietors to prepare in earnest for TPR authorisation.

“However, clarity and proportionality will be critical, particularly around investment strategy, sectionalisation and what constitutes a ‘significant event’. As CDC develops we expect it will attract a more diverse range of businesses than the established pension companies that are currently the dominant force in DC. This expansion will be a positive move, helping to drive innovation and competition. TPR will need to consider this when assessing new entrants for authorisation.

“The intent to ensure accurate promotion is absolutely right, but the current approach risks being too strict in practice. This could cause problems, particularly around trustee engagement with prospective employers. With a new form of pension scaling up in the UK it is really important employees receive clear, straightforward communications. There is a risk that the draft code is a barrier rather than an aid to that.

“The fitness and propriety framework is clear, proportionate and sensible and should help protect members and maintain confidence in CDC schemes. The requirements also provide a strong starting point and robust minimum standard for CDC scheme design. The authorisation process would benefit from greater clarity on the wider factors TPR expects trustees to have considered when assessing if the scheme design is sound. 

“It's helpful that TPR recognises that systems won’t be fully built and tested at the point of authorisation. This is a proportionate and realistic approach. Starting from scratch gives schemes an advantage in terms of streamlined, efficient, digital-first member administration. However, this will require significant up-front work, strong governance and experience in delivery for it to be done right. There’s still a long way to go with a lot of work needed for this to be in place and running smoothly. 

“In terms of the approach to CDC’s future development we believe there should be a phased approach. CDC should be established as a solid workplace product first. We are also keen to see a continuation to a future phase of longevity pooling giving providers wider freedoms to create overall retirement income products that meet member needs. Ultimately, we should move on to open up access to the whole population in retail versions in a safe and controlled way. Trying to offer a retail version from day one risks customer detriment and would considerably delay the launch, so we are supportive of the current approach which does not allow for retail CDC.”

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