The changes would see CDC schemes able to cover workers from multiple companies rather than single employers, representing a major expansion of who could benefit from them.

Pooling funds aims to boost the retirement living standards of workers, while also enabling schemes to make larger investments in assets such as UK businesses and infrastructure projects, the Government argued.

The UK’s first CDC scheme, the Royal Mail Collective Pension Plan, has more than 100,000 members, which ministers say reflects growing demand for pensions delivering income over a lifetime. The move is seen by Keir Starmer‘s Labour government as building on that progress.

It has also launched a consultation on “Retirement CDC” which would give people who have saved into a DC scheme the ability to move their pension pot into a CDC scheme when they retire.

Ministers say the aim of this is to have more people receiving a regular income for life that aims to keep up with rising prices without the need for workers to manage their own retirement money or work out how long their savings will cover them.

Minister for Pensions Torsten Bell said: “Too often people approaching retirement are left navigating complex choices and shoulder risks they shouldn’t have to face alone.

“Collective pensions offer savers a new option that in many cases will be a better deal, one where risks are shared, returns are smoothed and retirement incomes are stronger and paid for life.

“By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last and they can enjoy their retirement.”

The Government says the move builds on pension reform already underway including the Pension Schemes Bill, which could see a workers’ pension increase by as much as £29,000, as well as its revival of the Pensions Commission to confront a retirement crisis that risks future pensioners being poorer than today’s.

Nausicaa Delfas, CEO of The Pensions Regulator, said: “We are all working towards turning a savings system into a pensions system which provides a sustainable income through later life. Innovative solutions like retirement-only CDC schemes could play a part in this, and I’d encourage people to get involved with the upcoming consultation to ensure their ideas are heard.”

Pretty Sagoo, managing director of Defined Benefit Solutions, Just Group, said: “At a time when pensions policy is enjoying long-overdue attention, the government’s exploration of ways to further improve retirement income is welcome.

“Most DC savers expect their pension to provide the income needed to help them achieve financial security in retirement. Retirement CDC could be a valuable answer to that challenge for some schemes and scheme members, in addition to other solutions that are already available or are coming to this market.”

David Brooks, head of policy at pensions consultancy Broadstone, said: “CDC is a divisive solution but while it may not be perfect, it could certainly prove to be good enough.

“On one hand it satisfies the desire for a return to some degree of paternalism in pensions where people can, in return for their share of the cost, receive an income for life albeit without the gold plating of traditional defined benefit pensions,” he continued, as per Professional Pensions

“However, on the other there are question marks over whether it can provide better outcomes than individual defined contribution pensions or whether it can resolve accusations of inter-generational fairness. While this idea may be too late for many employers, it is hoped that enough will see this as a way, without open ended costs, of providing a more secure income for employees in their retirement.

“Despite the downsides of CDC, there are enough upsides to see this as a positive step forward with people able to receive a more secure income without having to make complex financial decisions at crucial pinch points in their life.

“The details of the regulations being laid will be key to whether this innovation can encourage enough employers to take the leap and participate.”