Continuity option 3 (closing the scheme to new contributions or members)

CDC code in force: 31 July 2026

1. Continuity option 3 is for the scheme to run on as a closed arrangement¹.
2. We are more likely to be satisfied where the trustees’ continuity strategy shows that they have considered each continuity option, in conjunction with the general requirement to address how members’ interests will be protected during a triggering event period.
3. We do not expect trustees of a new single-employer CDC scheme to make provision for continuity option 3 when it first applies for authorisation, unless this is the only continuity option open to the trustees under the scheme rules. However, we expect multi-employer CDC scheme trustees to consider when it is likely that continuity option 3 will become a viable option and to give an estimated timeframe for including the details in an updated strategy.
4. We expect to see that multi-employer CDC schemes have projected the point at which continuity option 3 becomes viable for them. It is important that commercial providers are willing to demonstrate their commitment for the longevity of the scheme. Pensioners in a scheme unable to proceed under continuity option 3 may see a significant reduction in income if continuity option 1 is followed.
5. There should be nothing that prevents trustees of a multi-employer CDC scheme following this continuity option if they consider it appropriate to do so². Where continuity option 3 is not permitted for either a single-employer CDC or multi-employer CDC scheme, we expect that to be clearly stated in the strategy. Similarly, if there is no intention that the CDC scheme will reach a point where continuity option 3 may be viable, we will need to be assured of the provider’s ability and commitment to support it in the long term, and how such an approach is appropriate and affordable. We will be less likely to be satisfied with a scheme that is unable to demonstrate the commitment or ability of the provider to support the scheme in the long term.
6. The strategy should document the framework for identifying key actions, decisions and owners of actions required to deal with a triggering event. It should also document the circumstances where continuity option 3 will be considered and how reserving will be built up to be set out at high level.
7. It needs to set out the principles by which decisions will be made, the timescales over which this will take place and how the costs of continuing to operate the scheme and resolve the triggering event will be paid for. We also expect that the continuity strategy will also describe how the trustees intend to comply with the formalities for closure set out by the trust deed and rules.
8. We do not expect the level of detail in the continuity strategy to be exhaustive, provided it meets the requirements set out in legislation.
9. A continuity strategy must also set out a statement of all levels of administration charges. Costs and charges set out in the continuity strategy must reflect the scheme’s financial sustainability calculations.
10. Once the trustees of a CDC scheme have pursued continuity option 3, they cannot revert it back to being an open scheme. A key aspect of continuity option 3 is to ensure pre-engagement takes place between the scheme trustees and us before the triggering events can occur leading to a formal decision to close the scheme.
11. This is to help clarify the intentions of the trustees, and employer or scheme proprietor. We will expect each party to understand what will be required of them, as well as other matters that need to be considered alongside the closure. For example, employers in a multi-employer CDC scheme, particularly in a commercial environment, will need to be informed of matters to enable them to continue to meet ongoing automatic enrolment obligations. We must be notified in writing as soon as practicable, if they become aware that a triggering event has occurred.
12. While we will remain in contact where a multi-employer CDC scheme has declared its intention to follow continuity option 3, the scheme must notify us when they consider that their preparations for the conversion of the scheme into a closed scheme are complete. The notification should be sent to us by the trustees within 28 days of the date the trustees have completed all the steps set out in the implementation strategy³.

Key issues to consider when pursuing continuity option 3

13. Key issues to consider when pursuing continuity option 3 are set out below. We are more likely to be satisfied that the continuity strategy is adequate if it addresses these considerations.

Details of scheme rules on how continuity option 3 is given effect⁴

14. The strategy should address:
    1. any provisions in the scheme rules that permit or require the scheme to operate as a closed scheme and any provisions that apply during the period of operation as a closed scheme
    2. any conditions or circumstances in which the trustees would operate on a closed scheme basis, as opposed to pursuing one of the other continuity options
    3. how the scheme’s design and method of actuarial management may have consequences for closing the scheme to new contributions or members

Operating a closed scheme and meeting costs⁵

15. The strategy should show:
    1. the point in time after which the trustees consider that continuity option 3 may be a viable option, where appropriate relating this to the three-to five-year timeframe of the costs, assets and liquidity plan (CALP)
    2. how long they would operate the scheme on a closed basis
    3. the factors which the trustees would take into account to assess whether continuity option 3 could be sustained indefinitely
    4. how target benefit levels could be sustained
    5. whether the scheme’s viability report and certificate would need to be revised, including the costs of this and how they will be met
    6. how the costs of running the scheme would be met
    7. how financial reserving requirements would be maintained throughout the proposed lifetime of the closed scheme
    8. how the trustees would stop accepting new contributions (where applicable), the timescales for doing this and how they would deal with late payments
    9. how they would stop admitting new members (where applicable) and the timescales for doing this
    10. a plan for making decisions on the scheme’s investment strategy and dealing with investments
    11. whether they would divide the scheme and open a new section
    12. a summary of the assumptions behind any estimated figures

Communications

16. The strategy should include:
    1. how and when they would consult with beneficiaries and employers on proposals to close the scheme
    2. how the costs of communication would be met
    3. how they would maintain communication with TPR

Legal references

¹ Section 38 of the Pension Schemes Act 2021

² Section 9(3)(g) of the Pension Schemes Act 2021

³ Regulation 31 of the 2022 Regulations

⁴ Section 17 of the Pension Schemes Act 2021, Regulation 15(1)(a) and (b) of the 2022 Regulations, and Regulations 38(1)(a) and (b) of the 2025 Regulations

⁵ Section 14(2) of the Pension Schemes Act 2021, Regulation 15(1)(a), (b), (l) and (n) to (t) of the 2022 Regulations, and Regulation 38(1)(a), (b), (l) and (n) to (t) of the 2025 Regulations

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