Pension administrators urged to upgrade systems ahead of 2026 reforms

As the UK’s pension landscape approaches one of its most significant structural shifts in decades, providers are being warned to act now. The expansion of Collective Defined Contribution (CDC) schemes is set to open new opportunities for multi-employer participation—but it will also demand an unprecedented degree of technological and operational readiness.

Festina Finance, a leading European provider of pension administration technology, has urged UK schemes and administrators to prepare their systems in advance of the new regulatory framework. Unconnected multi-employer CDC schemes will be able to seek regulatory approval in 2026 and begin accepting contributions from 2027. For those wishing to participate, readiness will not be optional.

“CDC schemes are coming,” said Dan McLaughlin, UK Country Head at Festina Finance. “We may not know exactly what form they will take, but they are coming—and providers need to be prepared. This introduces significant complexity for technology.”

A new regulatory era

CDC pensions were first made possible under the Pension Schemes Act 2021, but until now, they have been limited to single-employer models such as the Royal Mail scheme. The Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) are now developing a framework for multi-employer and commercial master trusts. These will allow unconnected employers to pool resources within a collective structure that balances investment risk and retirement stability.

For trustees and administrators, the reforms will introduce new governance duties, actuarial responsibilities, and disclosure requirements. Compliance will involve not only robust oversight and transparency but also the capacity to track collective performance and adjust benefits dynamically in real time. Traditional defined benefit (DB) and defined contribution (DC) systems, built around static entitlements or individual accounts, are ill-equipped to handle this complexity.

According to Festina Finance, the challenge lies in how CDC benefits must be calculated, tracked, and communicated. Unlike DB or DC pensions, where outcomes are either guaranteed or individually accrued, CDC schemes pool assets and distribute outcomes based on collective performance and actuarial modelling. This requires a more dynamic approach to both administration and communication.

McLaughlin warned: “It’s a mistake to think that CDC administration can be based on reheated DB systems. There are significant differences, as CDC pensions demand real-time tracking of collective fund performance and dynamic income adjustments based on actuarial modelling.”

Governance, transparency and legal implications

For law firms advising pension trustees and scheme sponsors, the reforms will have far-reaching implications. Administrators will face new fiduciary considerations around fair value distribution and risk pooling. The increased reliance on real-time performance data also introduces greater exposure to cyber risk, data accuracy issues, and potential disputes over benefit adjustments.

Lawyers specialising in pensions, regulation, and technology will therefore play a crucial role in helping clients navigate compliance frameworks, data governance obligations, and supplier contracts for CDC-ready systems. In-house teams within pension providers will also need to ensure procurement, risk management, and reporting structures meet the emerging standards of TPR.

The DWP’s technical consultation on multi-employer CDC frameworks has already hinted that greater emphasis will be placed on “transparency and communication,” reinforcing the need for both legal and technological alignment.

A strategic opportunity

Despite the scale of change, Festina Finance believes the move toward collective pensions presents a long-term opportunity for innovation and market expansion. CDC models could offer a middle ground between the high costs of defined benefit schemes and the volatility of defined contribution arrangements—potentially stabilising retirement incomes while spreading investment risk more efficiently.

“CDC isn’t just another scheme type that a systems upgrade will solve,” McLaughlin noted. “It’s a strategic shift that will require purpose-built solutions and fundamentally different tooling.”

He concluded: “Despite the complexity, this presents a huge opportunity. CDC offers a scalable way to deliver more stable retirement incomes without reverting to the high cost of DB provision. The technology uplift is real, but the prize is worth it.”

Outlook

The countdown to CDC reform has begun. Over the next two years, trustees, providers, and their legal advisers will need to work in tandem to ensure that operational systems, governance frameworks, and contractual relationships are ready for the collective era. Those who wait until 2026 to adapt risk being left behind—not only technologically but also competitively.

As the DWP and TPR refine the details, one thing is clear: the UK pensions industry is on the brink of a fundamental redefinition. CDC is not simply another product—it’s a systemic shift that will test the sector’s readiness for collective, data-driven pension management.