Collective pensions: is it time to review your options?

For housing associations that are balancing investment in homes and services with the need to recruit and retain staff, pension spending needs to deliver value. Managing legacy pension liabilities is important, but so is asking whether your future pension offering makes the best use of your budget.

Collective pensions provide a reason to revisit that question. This does not mean every organisation should change its arrangements, but not making any changes to your pension offering to staff should be a conscious, informed choice.

What are collective pensions?

Collective pensions is a new name increasingly used for collective defined contribution (CDC) pensions.

These schemes combine:

• For members, a target pension at retirement and an income for life after retirement, like a defined benefit (DB) scheme; with
• For employers, the cost certainty of a defined contribution (DC) scheme.
  

Like a DC scheme, benefits are funded by a regular, fixed contribution from employers and employees but, unlike a DC scheme, the investments are managed collectively. Members share risk, enabling CDC schemes to invest in growth assets for much longer than either a typical DB or DC scheme.

The potential attraction is better retirement outcomes than existing DC schemes and fewer decisions for employees about investments and making their savings last. The trade-off is less individual flexibility than conventional DC provision. Neither approach is automatically right for every workforce.

Why consider this now?

The provider market for collective pensions is taking shape. There are now four developing propositions for whole-of-life collective pension schemes. TPT was the first provider to announce its plans, followed by Pensions Mutual and then Aon. More recently, Arboreum Pensions announced its plans in September 2026.

The providers are targeting availability in 2027 and 2028, but they will need to obtain regulatory authorisation first. So, while there are not any schemes currently open for employers to join, more information about proposed designs is becoming available, making practical comparisons possible.

Government policy has also added momentum to the market. It recently announced a commitment to develop a national collective pension scheme for care workers – which will be particularly relevant to housing associations providing care services. However, the announcement did not provide significant details on the proposed scheme design.

CDC is moving from something to consider in the future to something to assess now. That does not require an immediate commitment, but it does provide an opportunity to review your objectives and understand the alternatives.

How should housing associations assess the future pension offering?

1. What would suit you and your workforce?

Start with your objectives for your pension strategy, your budget, and what would suit your employees (both current and future) by considering their ages, earnings, retirement expectations and appetite for managing pension decisions.

2. Are you comparing DC and collective pensions fairly?

Compare collective pensions with a well-designed, contemporary DC arrangement that reflects how employees are likely to use their savings – which may not be your current pension scheme.

As LCP Partner Sam Cobley explains in ‘Are you comparing CDC and DC pension offerings fairly? Some key areas to focus on’, the DC benchmark can materially affect the apparent improvement from CDC. Comparisons should reflect the latest investment approaches and realistic retirement choices, including drawing an income while remaining invested.

3. What you should consider in a collective pension scheme

When considering a collective pension scheme, it is important to look beyond the quoted starting pension by considering how benefits are calculated, what inflation increases are targeted, how this is adjusted with emerging experience, and what could cause pensions to fall.

Fairness matters, particularly for a workforce spanning different ages, salaries and occupations. How a scheme’s design treats different generations and allows for differences in life expectancy is really important. This is particularly the case for schemes that will cover multiple employers, covering a variety of locations and categories of members. Our blog ‘How do we ensure fairness in CDC schemes?’ explores approaches such as adjusting benefit accrual to reflect longevity differences, while balancing fairness with simplicity.

Investment strategy also deserves scrutiny. Collective pension schemes need a different approach from traditional pension schemes: success is about sustainable pensions, not simply maximising returns for a given level of investment volatility. LCP’s ‘CDC schemes need a new investment approach’ highlights pension stability, inflation resilience and recovery after market stress as important measures.

As with all types of pension scheme, housing associations will also need clarity on other factors, including governance, charges, joining and leaving terms, administration and communications.

Start with a review, not a commitment

Reviewing your pension offering, understanding employee needs and considering how any change would be implemented all take time. Starting that work does not mean committing to a move.

A review may confirm that your existing DC arrangement remains the right choice. Equally, it may identify improvements that could be made or reasons to explore collective pension schemes further. The important point is that sticking with the status quo should be an informed decision, rather than simply the consequence of not considering the alternatives.

Collective pensions are moving from something that can be considered in the future to something to consider now. The question is not “should every housing association move to collective pensions?”, but “has your housing association assessed whether it could be right for you and your staff?”

Want to find out more?

LCP’s specialist housing team can help with all aspects of your pension strategy. If you’d like to discuss how we can help, please do get in touch.