The UK government’s proposed draft collective defined contribution (CDC) pension legislation to extend CDC beyond single or connected schemes may be “unduly onerous”, the Society of Pension Professionals (SSP) has warned.

In its response to the Department for Work and Pensions’ (DWP) consultation, the SPP stated that the proposed regulations could inadvertently constrain activity.

The SPP raised concerns around the definition of ‘promotion and marketing’ activities that trustees are prohibited from taking part in, saying that it was “very broad and could plausibly constrain communications with current or prospective employers that largely form part of good governance of the scheme by trustees”.

Its consultation response also highlighted the potential risk that schemes could, at some point in the future, inadvertently transition between the connected and unconnected employer regimes, and this would pose “significant difficulties” in practice.

Furthermore, the SPP questioned whether the proposed constraints on changes in investment strategy, with the associated requirement to sectionalise, would meet the desired legislative intention.

The SPP made a total of nine recommendations it believed would improve the proposed legislation, including further refinement of ‘projected average annual increase’ definitions, and the revisiting of draft regulation 25 to ensure it meets the policy intent for the opening of a new section for unconnected multi-employer CDC schemes.

“The SPP broadly welcomes what’s being proposed,” commented SPP CDC Group chair, Edd Collins.

“We hope that our recommendations relating to some of the areas of concern are taken on board and that these help improve the legislation.

“Ultimately, we all share the same ambition to make sure as many savers as possible can take advantage of the numerous benefits of CDC pension schemes.”

This article was originally published on our sister website, Pensions Age.

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