Financial resources: Cash and near-cash assets

Who this guidance is for

This guidance is aimed at the scheme proprietor, or the trustees of a collective defined contribution (CDC) scheme. 

Published: 31 July 2026

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Overview

This guidance sets our expectations on how CDC schemes should approach holding cash and near-cash assets as part of their financial resources.

We define cash and near-cash as follows:

• Cash is an asset that retains its face value, is highly liquid and can be called upon for immediate use.
• Near-cash assets are financial instruments that exhibit similar characteristics to cash.

We refer to both cash and near-cash as 'cash' in this guidance.

We may update this guidance occasionally to reflect changes in financial markets. If we do update it, we will allow schemes a transition period to comply with new expectations.

Our expectations on cash reserves

In paragraph 1 of the Financial sustainability: Financial resources module of our CDC code, we set out our expectations of the financial resources that a CDC scheme must be able to demonstrate. Paragraph 12 of the Financial sustainability: Costs, assets and liquidity plan (CALP) module states that we are unlikely to be satisfied by a scheme which has cash or near-cash assets that are less than 15% of the calculated necessary financial resources.

Paragraph 20 of the Financial sustainability: Financial resources module also states that, in most cases, we believe that multi-employer CDC schemes should have access to a minimum of 15% of their calculated financial reserves in cash. We may require that cash held outside the scheme is ringfenced and provides trustees with unfettered access to it.

The main aim of holding cash is because it may be required at short notice, and then on a regular basis, following a triggering event.

Paragraph 9 of the Scheme proprietor: Accounts module of the code states that there may be a number of reasons why a scheme proprietor is unable to provide audited accounts for consideration at authorisation. In this situation, the scheme proprietor should set aside cash or near-cash assets equivalent to the value of the financial reserves identified in the costs, assets and liquidity plan (CALP).

Investment principles

We expect these investment principles to be followed.

1. Stable value liquidity management
   This means:
   • low interest-rate duration and short maturity
   • low credit risk – underlying investments have a suitably high credit rating
   • high liquidity – instruments to be marked to market daily and with reasonable overnight and weekly liquidity
2. Use of appropriate cash performance benchmarks, such as SONIA (Sterling Overnight Index Average).
3. Diversification:
   • avoid concentration risk and provide sufficient diversification
   • for fund structures, to ringfence assets from the funding institution in compliance with UK UCITS (Undertakings for Collective Investment in Transferable Securities) or equivalent vehicles
4. No shorting of securities.
5. No lending of directly held securities.
6. Investment should be in UK sterling issuances and where not currency hedged back into sterling.

In making the investments, you should seek appropriate advice which satisfies regulatory requirements.

Overview

This guidance sets our expectations on how CDC schemes should approach holding cash and near-cash assets as part of their financial resources.

We define cash and near-cash as follows:

• Cash is an asset that retains its face value, is highly liquid and can be called upon for immediate use. 
• Near-cash assets are financial instruments that exhibit similar characteristics to cash. 

We refer to both cash and near-cash as 'cash' in this guidance.

We may update this guidance occasionally to reflect changes in financial markets. If we do update it, we will allow schemes a transition period to comply with new expectations.

Types of investments

We accept that schemes may be willing to take on a degree of risk in relation to realisable value, and we are prepared to accept an allocation to short dated UK government debt.

Cash can be held directly or through money market funds which invest in the assets listed below. 

Our preference is for schemes to hold cash in one or more of these forms:

• short-term money market funds
• cash held in a UK deposit account
• time deposits

For directly held portfolios, we are likely to consider the following assets as appropriate:

• floating rate notes
• certificates of deposit
• overnight repurchase agreements
• commercial paper
• asset-backed commercial paper
• medium-term notes
• short-dated UK government bonds

An appropriate balance should be struck between cash in bank accounts and investment in cash-like assets. This is likely to require cash planning to manage how long money is held in bank accounts should cash-like assets need to be realised.

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