What is a CDC scheme?

CDC code in force: 31 July 2026

1. If a scheme does not meet the legislative requirements to be a CDC scheme, we cannot assess an application to authorise it and it cannot operate as a CDC scheme. This section summarises our position using definitions taken from the Pension Schemes Act 2021, the 2022 Regulations and the 2025 Regulations and should be read in conjunction with them.
2. Anyone seeking to establish a CDC scheme should consider taking professional advice to ensure that their scheme meets the requirements required by legislation. There are differences between the authorisation criteria for single-employer CDC schemes and multi-employer CDC schemes. It is not the intention that a scheme authorised as a single-employer CDC scheme will be able to become a multi-employer CDC scheme after it has commenced operation (and vice versa), so careful thought should be given to the type of authorisation that is required at the outset. Other modules in this code provide more specific details on the relevant authorisation requirements.
3. In this code, references to a CDC scheme are to¹ a qualifying scheme or a section of a qualifying scheme which can only provide qualifying benefits. References to a CDC section are to a section of a qualifying scheme which can only provide qualifying benefits.
4. A scheme will be a qualifying scheme for the purposes of the definition of CDC scheme if it²:
   1. is an occupational scheme established under an irrevocable trust
   2. is not a relevant public service scheme
   3. must provide qualifying benefits which consist of or include the payment of a pension
   4. must, if the scheme provides qualifying and other benefits or types of qualifying benefits with different characteristics, have appropriate separation of those benefits
5. A qualifying CDC scheme or CDC section of a qualifying CDC scheme may be a single employer CDC scheme or a multi-employer CDC scheme (or in each case a CDC section of such scheme).
6. To be a single-employer CDC scheme: the CDC scheme or CDC section must only be used, or intended to be used, by a single employer or two or more connected employers³.
7. To be a multi-employer CDC scheme: the CDC scheme or CDC section must be used, or intended to be used, by two or more employers, some or all of which are not connected with each other⁴.
8. A qualifying benefit⁵:
   1. is provided from the available assets of the scheme (for example, assets that come from member and employer contributions and are available to provide benefits collectively)
   2. is subject to periodic adjustment, in accordance with the scheme rules, to achieve a balance between the value of the available assets and the required amount (for example, the amount expected to be required to provide benefits collectively)
9. If a scheme provides qualifying benefits and other benefits, for example a defined benefit lump sum or a DC benefit at an individual level, the benefits that are not qualifying benefits must be separated from the CDC benefits and provided from a different section⁶. Only the sections providing qualifying benefits will be subject to CDC authorisation.
10. To be separated correctly:
    1. a section providing a qualifying benefit cannot provide any other type of benefit (for the avoidance of doubt a lump sum can be provided from a CDC section where it is a qualifying benefit)
    2. contributions made in respect of qualifying benefits must only be made into the section providing those qualifying benefits
    3. assets are apportioned to each section and cannot be used for the purposes of a different section
11. Each CDC section must be authorised, either at initial application or as different 
    qualifying benefits are created.

Legal references

¹ Section 1 of the Pension Schemes Act 2021

² Section 3 of the Pension Schemes Act 2021

³ Section 1(3) of the Pension Schemes Act 2021

⁴ Section 1(3) of the Pension Schemes Act 2021

⁵ Section 2 of the Pension Schemes Act 2021

⁶ Section 3(6) of the Pension Schemes Act 2021

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