Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Collective Defined Contribution definition

What does Collective Defined Contribution mean? A collective defined contribution (CDC) scheme is a workplace pension design where contributions are fixed, but the retirement income is a targeted (not guaranteed) amount, with increases aimed to keep pace with inflation but capable of being reduced or increased to reflect funding. Investment and longevity risks are pooled across members, and employer liability is limited to agreed contributions (unlike defined benefit schemes). In Great Britain (England & Wales and Scotland), CDC is a statutory scheme type known in legislation as a “collective money purchase” scheme under the Pension Schemes Act 2021 and related regulations. Such schemes require authorisation...

UK CDC pension schemes: design, risk sharing, advantages and disadvantages, and regulatory evolution from Pension Schemes Act 2015 repeal to the Pension Schemes Act 2021 authorisation and supervision regime

Published by a LexisNexis Pensions expert

Practice notes

A collective defined contribution (CDC) scheme is a type of defined ambition arrangement.

What is defined ambition?

At its core is the principle of risk sharing, meaning the pension scheme’s risks are not shouldered wholly, or mainly, by either the employer or the members.

A defined ambition pension combines aspects seen in traditional defined benefit (DB) schemes with elements typical of traditional defined contribution (DC) schemes.

According to the Department of Work and Pensions (DWP), the purpose of a defined ambition pension is to provide members with greater certainty than a pure DC pension, while aiming for less cost volatility for employers than current DB pensions.

In a traditional DB arrangement, the employer typically carries the full burden of risks linked to investment performance, inflation and how long members live.

There has been a marked move away from traditional DB owing to factors including economic pressures and the treatment of DB liabilities in company accounts...

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Web page updated on 22/05/2026

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