TPT Retirement Solutions launched a modeling tool to assist pension schemes preparing for collective defined contribution (CDC) arrangements. These arrangements will soon appear in the UK through TPT’s upcoming multi-employer offering.
Software built for CDC’s uncertain future
The tool was developed with Moody’s, using its PFaroe software. PFaroe already provides portfolio analytics and risk management for defined benefit pension schemes, consultants, and investment managers. The new feature combines valuation modeling with projections of potential pension increases for members.
Paul Eagles, head of CDC at TPT, stated that modeling capabilities will be essential for regulatory approval and ongoing management. He noted that multi-employer CDC is new for regulators, the industry, and members, making a strong scheme design important for success. Modeling tools will play a key role in this process.
The software is available to in-house actuaries, investment managers, and external trustee advisers, including scheme actuaries. TPT’s multi-employer CDC proposal is currently under regulatory review, with the application submitted at the end of July.
Adoption of CDC schemes remains unclear. A survey by Sackers revealed that 61% of respondents doubted the structure would become widely used in the UK. Concerns focus on how the model will balance member benefits with long-term financial stability.
Simon Robinson, senior director and product manager at Moody’s, said the company aims to provide risk management solutions suited to UK pensions. He added that the software’s flexibility and client connections will help meet the needs of CDC as it develops in the UK.
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The modeling tool lets schemes simulate scenarios, such as how asset performance and demographic changes might impact future pension increases. This helps trustees and employers make decisions about investment strategy and scheme design before and after launch.
Regulatory approval is the current priority. TPT’s application is among the first under the new framework, leaving little precedent for how regulators will evaluate these schemes. The modeling tool may help demonstrate financial resilience under different conditions.
If approved, TPT’s multi-employer CDC scheme would let unrelated employers pool contributions, sharing risks and rewards across a larger membership. The structure aims to provide more stable retirement outcomes than traditional defined contribution schemes, which place all investment risk on individuals.
Success depends on more than regulatory approval. Employers and members must understand how the model works and whether it delivers on its promises. The tool may help clarify these points, but it won’t resolve whether CDC can overcome resistance to change in the industry.
Recent developments in pension risk transfer highlight similar challenges. A large buy-in deal by Mercer Master Trust shows how schemes are adapting to new financial pressures.
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