New regulations and a revised regulator code have opened collective defined contribution pensions to unconnected multi-employer schemes for the first time. Here is what a corporate adviser needs to know before it turns up on a client shortlist.
In reading this article you will understand:
- How collective defined contribution (CDC) pensions work differently from individual-pot DC, including what a target benefit means as against a guaranteed one.
- What the new unconnected multiple employer scheme (UMES) regulations and tPR’s revised CDC code of practice actually change, and the realistic timeline for the first commercial multi-employer CDC schemes.
- What a corporate adviser should weigh, including the unresolved question of fairness between employer cohorts, before treating multi-employer CDC as a live option for a client scheme.
From 31 July 2026, regulations enabling unconnected multiple employer collective defined contribution schemes came into force, the most significant expansion of CDC’s legal reach since the model was introduced. Until now, CDC has existed in the UK only for a single employer or a group of financially connected employers, the basis on which Royal Mail built the UK’s first CDC scheme. The new rules, alongside an extended code of practice from tPR, allow a scheme to pool the workforces of employers with no financial connection to one another, run commercially by a third-party provider. For corporate advisers, CDC stops being a large-single-employer curiosity and becomes something that could sit on a client’s shortlist within a year or two.
How CDC Actually Works
CDC works quite differently from the individual-pot DC model most advisers are used to recommending. Members and their employer pay contributions into a single collective fund rather than individual pots, invested and managed as one pool by trustees, not member by member. Instead of an accumulated pot converted into an annuity or drawdown at retirement, members are told a target pension, an expected level of income for life, based on actuarial assumptions about investment returns, inflation and longevity across the whole membership.
Each year, an actuarial valuation compares the fund’s assets against the value of the benefits it has promised. Where the valuation shows a surplus, benefits already in payment and those built up can be increased; where it shows a deficit, they can be reduced. Nothing about a CDC target is contractually guaranteed the way a DB pension is. But nor does a member’s outcome rest solely on their own contribution timing and fund choices, which is the sequencing risk that catches an individual DC saver drawing down through a falling market. Risk is smoothed across the membership, and across time, instead. Royal Mail’s Collective Pension Plan has run on this basis since October 2024, funded by 6% of pay from employees and 13.6% from the employer, targeting an income for life plus a lump sum for a membership of over 100,000.
What’s New: Unconnected Multi-Employer Schemes
Until 31 July 2026, the law allowed CDC only for a single employer or a corporate group of financially connected employers. The Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025, published by the DWP on 23 October 2025 and in force from 31 July 2026, remove that restriction. An unconnected multiple employer scheme, or UMES, can now pool the workforces of employers with no corporate relationship to one another, run by a provider on a commercial, whole-of-market basis, closer in shape to a DC master trust than to a bespoke single-employer scheme like Royal Mail’s.
tPR consulted on an extended CDC code of practice between 19 December 2025 and 13 February 2026, then laid the revised code before Parliament on 29 April 2026; it completed its statutory 40-day parliamentary process and came into force alongside the regulations, on 31 July 2026. It borrows heavily from the master trust regime: a UMES scheme needs a single scheme proprietor responsible for its business plan and running costs, fitness and propriety checks on that proprietor and its chief investment and finance officers, and specific controls on promotion, since tPR expects UMES schemes, unlike Royal Mail’s, to be actively sold into the market. tPR began accepting authorisation applications in August 2026. Sackers partner Helen Ball has suggested the first UMES schemes could be up and running as early as next year, for providers already preparing to enter the authorisation process. TPT Retirement Solutions and Aon have both signalled plans for whole-of-life multi-employer CDC, Aon via its master trust from 2028, while WTW’s LifeSight is working towards a retirement-only version instead.
The Governance Question: Fairness Across Cohorts
Pooling investment and longevity risk across one employer’s workforce is manageable. Pooling it across many unrelated employers, who join at different times and bring very different membership profiles, is a harder problem. A single-employer scheme largely sidesteps the question of whether one cohort ends up subsidising another: older joiners against younger, or one employer’s demographic against another’s, all through the same annual adjustment.
The revised code addresses this partly through sectionalisation. Where a change to a scheme’s investment strategy would materially affect benefit levels or the annual adjustment, the code requires future service benefits to sit in a separate section rather than being folded into one blended decision. Splitting a scheme by membership group to head off cross-subsidy is an option the code leaves open, not a requirement it imposes. A revised technical actuarial standard, TAS 310, published on 10 July 2026, also takes effect from 31 July 2026, and it treats fairness between cohorts as a live actuarial concern in multi-employer arrangements specifically. Even so, this is contested ground. Dutch collective schemes have found that perceptions of fairness between generations can become a real source of tension even where the mechanics behind an adjustment are sound. Treat cohort fairness as a first-order due diligence question for any UMES provider, and ask it early rather than once terms are otherwise agreed.
What It Means for Advisers
CDC is not yet a mainstream recommendation and won’t be for some time. The first UMES schemes aren’t expected to be authorised and taking members until early 2027, and a provider market this new deserves hard scrutiny before it goes in front of a client. The regulatory groundwork has changed all the same, so it pays to understand the trade-off before a client asks about it.
There is a real pitch here for an employer client. CDC gives members a different risk profile from individual-pot DC: nobody’s outcome depends solely on market conditions at the point they happen to retire, and a well-run collective fund can, in principle, target a higher and steadier income than the same contributions would buy through an individual pot drawn down or annuitised alone. The caveats are just as real. A CDC target is not a promise, benefits can be cut as well as increased, and a member who wants a guaranteed number to plan against won’t get one. For a multi-employer scheme, add the unresolved question of cohort fairness and a provider market whose charges, governance and track record don’t yet exist in any tested form.
That doesn’t rule multi-employer CDC out of a future scheme review. It does mean explaining the target-versus-guaranteed distinction plainly to a sceptical employer or member, and asking any UMES provider directly how it handles fairness between cohorts before you recommend it. Beyond that, watch which providers actually get authorised, and how tPR handles their applications, before this moves from a watching brief to a live option.
Things to reflect on for CPD
- How would you explain the difference between a CDC target income and a guaranteed DC pot value to a client used to individual-pot thinking?
- Which of your corporate clients might be a plausible early adopter of a multi-employer CDC scheme once one is authorised, and what would you need to see from the provider first?
- How would you assess a UMES provider’s approach to fairness between employer cohorts as part of your due diligence, before recommending the scheme to an employer client?
What would need to be true of a CDC provider’s charges, governance and track record before you’d be comfortable putting it on a shortlist alongside conventional DC master trusts?
