When changes to the scheme’s investment strategy require the scheme to be sectionalised

This guidance outlines our expectations when investment strategy changes in a multi-employer CDC scheme may materially affect benefits and require the trustees to create a new section and notify us of a significant event.

Published: 31 July 2026

Who this guidance is for

This guidance is for trustees of multi-employer CDC schemes and should be read alongside our CDC code of practice.

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Overview

The requirement to sectionalise a CDC scheme occurs when there is a material impact to the level of benefits and/or the level of annual adjustments due to a change to the scheme’s investment strategy. This is set out in paragraphs 10 and 11 of the Authorisation of sections module of our CDC code of practice.

This guidance outlines our expectations on this requirement. It also includes examples to support trustees in assessing the level of impact that may require the scheme to sectionalise and notify us of significant event.

Trustee responsibilities when there is a change to the scheme’s investment strategy

Occasionally, the trustees of a multi-employer CDC scheme may decide, or be asked, to amend the scheme’s investment strategy. 

Trustees are required to consider the impact of potential investment strategy changes before initial authorisation. They must set out in their viability report what changes they consider would materially impact the level of benefits and/or the level of annual adjustments. Before agreeing to make a change, the trustees should ask the scheme actuary to advise on the impact of the change on their ability to provide the annual viability certificate.

Assessing whether a change to the investment strategy has a material impact on benefits

There are a range of reasons why a request to change a multi-employer CDC scheme’s investment strategy may be made. The trustees’ role is to assess the material impact of this potential change. 

The examples below set out some scenarios where a change has been requested and how the level of impact could be assessed. 

Example of a material impact

The current investment strategy for the scheme is described as a medium risk strategy. The proposed change to the strategy would result in it becoming a high-risk strategy, expected to result in materially higher and more volatile benefits than those described to employers when they started participating in the scheme.  

Example of less clear impact

A scheme initially targets annual increases in line with CPI, and employers decide to participate in the scheme on that basis. Over time the actual increases, and therefore the target level of future increases, increase to CPI + 1% per year. The decision is made to amend the scheme’s investment strategy and asset allocation to bring the level of increases down to be in line with CPI again. Whether the trustees consider that this change is material may depend on the expected returns on underlying assets and the changes necessary to meet the original target.

Example of immaterial impact

The scheme has been broadly meeting its initially targeted annual increases and the volatility of those increases has been in line with expectations, but the expected asset returns change. The trustees adjust the scheme’s investment strategy and asset allocation so that they can continue to meet the targeted level of increases with a similar level of volatility of those increases.

Notification requirements where there is a significant change to the investment strategy

Where a change to the investment strategy is considered to be material, this must be notified to us as a significant event. 

See the Supervisory return, scheme return and significant events module of the CDC code of practice for more information on when and how to notify us.

Member transfer considerations when sectionalisation is required

Where sectionalisation of a multi-employer CDC scheme is required, only benefits relating to future contributions and benefits in respect of future transfers-in will be provided from the new section. It is likely the new section becomes the default option for new entrants and the original section remains open to future contributions for members who joined before the new section was opened.

Where a new default section is opened, trustees may want to consider offering members the opportunity to transfer their accrued benefits within an existing section of the scheme to the new section. Trustees may also want to consider whether to make a bulk transfer without member consent from the old section to the new section. 

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