A HUGE shake up of pension schemes could boost retirement savings for millions of workers.

A new type of workplace pension, known as Collective Defined Contribution (CDC), recently launched and could soon be expanded.

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Currently ,there are two main types of pensions through employers – defined benefit (DB) and defined contribution (DC).

DB pensions pay you a guaranteed income in retirement based on your salary, while with DC pensions, you build up a pot of money and then take an income from it after you stop working.

CDC pension schemes, on the other hand, are where employer and member contributions are pooled together into a collective fund and invested, with the aim of growing this pool of money over time.

Workers are then given a target pension income they will be able to take once they retire.

Companies in the UK have been able to offer CDC pensions since 2022, when new rules gave them the go ahead, and Royal Mail this week became the first company to launch one.

Now, the scheme could be expanded so that millions more workers can take advantage after the Government launched a new consultation.

It’s proposing that access should be broadened by allowing a wider range of businesses and employees to sign up.

As it stands, only single companies, or companies connected to them, can set up CDC schemes.

But the Government wants schemes to be open to multiple, unconnected employers, making the schemes more accessible.

Minister for Pensions, Emma Reynolds, said: “We are seizing this exciting opportunity to modernise our pensions market to deliver better outcomes for millions of workers.

“People work hard to put money aside for their pension with every pay cheque. This significant innovation will offer a more predictable income and greater finance security for future pensioners.”

The consultation is calling for views from employers, industry experts, pension providers and the public on draft regulations and their potential impact.

It will run for six weeks – until November 19.

It comes after Chancellor Rachel Reeves launched a huge review of pension schemes that aims to add over £11,000 extra to a typical retirement pot.

What do the experts say?

Experts and others in the industry are being encouraged to take part in the consultation, and many see it as a positive for the UK workforce.

Nausicaa Delfas, chief executive of The Pensions Regulator, said: “Multi-employer CDC pension schemes offer the potential to deliver better outcomes for thousands of UK pension savers, turning a pension pot into a retirement income.

“I encourage industry to take part in the consultation and we look forward to working with Government to develop an appropriate regulatory regime.”

Others say that the announcement of the consultation shows the current government is putting CDC schemes in the spotlight.

And David Brooks, head of policy at independent consultancy Broadstone, said: “Today’s consultation and the rhetoric from the Pensions Minister suggests CDC will be a core pension policy for the current Government.

“They seem clear that CDC could be an answer to many of the issues in the current pension system – including greater investment in the UK economy – and are looking to replace the reliance on individual DC pots with pooling of collective pots.

“However, if CDC is to gain a foothold in the UK’s pension provision, then there has to be an allowance for unconnected employers to work together. If not, CDC will remain the domain of only the very largest employers.”

However, Mr Brooks pointed out that launching a new model of pension saving will likely prove a huge operational and financial challenge for smaller employers who also went through the auto-enrolment reforms in the past.

He added that there’s uncertainty over how the “club” approach – where multiple employers pool together – would work in reality.

“The design, regulation and authorisation of these schemes will also need to be implemented correctly, and the current consultation will form the bedrock of this,” he added.

In terms of what the shakeup could mean for workers, Steve Webb, former pensions minister and current partner at LCP, said it should be a good idea for many.

“In principle, these schemes could be good news for people who are looking for something more than an individual pot of money which they have to manage at retirement,” he said.

“Similar schemes have worked reasonably well in other countries such as Netherlands, Scandinavia and Canada, though with local variations in exactly how they worked.”

How does a CDC scheme differ?

Previously, workers only had two types of pensions to choose from.

DB pensions are where what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year on retirement.

These schemes are not usually offered to new workers any more, apart from in some public sectors such as the NHS and teaching.

DC schemes are where contributions from you and your employer are invested and then your retirement pension depends on the size of your individual final pension pot.

CDC schemes are seen as sitting between the two, but with a CDC pension, you don’t get your own pot.

Instead, workers in your business will put money into a collective pot – with your employer contributing too.

This pot is shared between workers, with each employee drawing an income from this big fund when they reach retirement.

Mr Webb explained: “The idea of a collective DC scheme is that it falls somewhere between the two extremes of old-style Defined Benefit (DB) pensions where there is a hard promise and the employer has to bear all the risks, to new-style individual DC pensions where the risks around investment performance, inflation and how long you live are all on the individual.”

He pointed out that in a CDC you are given a target pension figure for each year you are in the scheme, and while it’s not guaranteed, it’s what you’re aiming for.

Mr Webb added: “If everything goes well you may get a bit more. If things go badly then workers and pensioners might get a bit less. This could be, for example, lower annual inflation increases than they were expecting or even – in extreme cases – a cut in pension.

“The idea is that you do all of this collectively – this means at scale (which could improve cost-effectiveness) and by pooling risks across large numbers of members of all ages.”

He also said that a particular advantage is that a CDC pension lasts as long as you do – so you don’t have to manage an individual pot in your seventies and eighties and hope it doesn’t run out.

Can I get more cash through a CDC scheme?

In theory, you could get more money when you retire under a CDC scheme.

Hargreaves Lansdown’s senior pensions and retirement analyst, Helen Morrissey, previously told The Sun that this is because workers of different ages will invest into a collective pot of money.

This allows cash to be invested in “higher risk investments that might not be otherwise possible for older workers”, she said.

This is because there is a much bigger pot of money to invest, compared to your own individual pot.

The bigger the amount you invest, potentially the bigger the profit you could make – but you are in no way guaranteed a return.

“If times are tough on the stock market, or people – especially those in ill health – transfer out, then the scheme may have to reduce the income it aims to pay out,” she said.

How can I sign up?

Your employer will have to set up a CDC scheme before you can apply to it.

Employers can set themselves up with a CDC scheme if it’s currently an option for them.

It’s worth getting in touch with your company to see whether it is planning to offer this option or not.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

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Advice firm owners should only sell their business as a last resort, according to Roderic Rennison, partner at Catalyst Partners.

During the aptly named ‘Are you sure you want to sell your business?’ session at Money Marketing Interactive in London today (8 October), Rennison said those looking at exiting the profession should consider all the other options available to them first.

“Selling your firm should be the final option,” he told delegates.

“Before you consider whether a sale is the best option, have you considered a management buyout (MBO)? Might an employee ownership trust (EOT) be appropriate?

“If you have children or relatives around, would some sort of family succession be appropriate? If not, why not?”

He acknowledged that with an MBO or EOT, “you might be looking at five to 10 years” to complete.

If an advice firm owner still does consider a sale to be the most appropriate option, they were warned that “not all sales are the same”

“Will it be the full sale of all the shares, or 51%? Or do you want to take equity shares in the buyer’s business?” said Rennison.

“There are a number of choices and decisions to make.”

For anyone considering selling, Rennison stressed the importance of having a written plan in place – even if it is just on one sheet of paper.

As well as reviewing this plan regularly to check goals, acquirers like to see a plan “as it is evidence that you have a growth strategy”, he said.

He said some of the things acquirers want to see when looking for a business to buy are a high average AUM per client, assets on a CIP/CRP, assets on a platform, an ongoing adviser fee of around 75bps, a good mix of clients and few DB transfers.

“The first question a buyer will ask if have you done your annual review, and can you evidence it? It wasn’t even a question that was on their lips a year ago,” he added.

Delegates were also warned that “completion of the sale is not the end of the process”.

He said it was good to look at the sales process an an iceberg, with the sale itself the tip and everything else, including integration, underneath the water.

“Failure to integrate properly, he warned, can affect staff morale and is also likely to affect deffered payments.

Duncan Sherlock, principal partner at Foster Denovo, joined Rennison on stage and gave a first hand account of what it was like selling his advice business.

He explained that how he took the business from nothing to £140m assets under advice, before deciding to sell up due to the stress levels involved in running the company.

“I wanted to reduce my stress levels, that was the deciding factor,” he said.

He said he looked at three options before selling, including an MBO, EOT and family succession.

He discounted the latter option when his wife told him and his son that “one of you will die, and I’d rather you didn’t”.

“So we came to the conclusion that selling was the best solution,” he added.

Sherlock said that he had four or five offers for the business before Covid hit.

They eventually completed the sale on December 31, 2023 and he joked “we had quite a good New Year’s Eve last year”.

“But my point is, when you’re embarking on this journey, it is important to remember it is not a quick process.

“When we had the offer you think ‘that is the end of it, it’s over’, but it isn’t. Then you have all the due diligence.”

Sherlock said one of the things he struggled with was wanting to stay employed after the sale.

“I wanted to stay employed because it was important to me I was going to feel safe in the place I put my clients

“You want to be comfortable that when you take your clients to a different firm.

“However, I struggled. I was used to making all the big decisions, and suddenly you are having to accept decisions being made without you.

“If you want to retain control of your business, selling isn’t the right thing for you,” he added.

HERBAL Essences customers are in a lather after the haircare firm shrunk its conditioners by almost a THIRD.

Its Dazzling Shine, Hello Hydration, Daily Detox and Ignite My Colour hair moisturisers have gone from 400ml to 275ml in recent months, but remain at around £2.

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The product is now sold in tubes rather than bottles after the 31% reduction, leaving customers confused and angry about the change.

One, Brian Brennan, fumed on the review site Trustpilot this week: “My wife has always used the shampoo and conditioner, the prices were very good. 

“The shampoo and conditioner were in 400ml bottles. Now they put the conditioner in a 275ml tube container and charge the same price for 125ml less.”

Another added on X: “Why are you no longer selling 400ml bottles of conditioner? Now I can only find 275ml tubes, which means I’ll need to replace them more often – and they’re not that much cheaper!”

A third added: “Just been comparing the old and new Herbal Essences conditioner bottles, and the old one has 400ml, almost half a litre, whereas the new squeezy bottle only has 275ml. 

“That’s more than a quarter of your conditioner being stolen from right under your nose!”

Its equivalent shampoo range continues to be sold in 400ml bottles.

Shrinkflation is when products shrink in size but remain at the same price, meaning shoppers pay the same for less.

It’s a tactic often used by companies to avoid hiking prices, as a change if size is less noticeable.

Susannah Streeter, of investment firm Hargreaves Lansdown, said Herbal Essences’ owner Procter and Gamble (P&G) had been increasing prices month on month, which has put off price-conscious shoppers.

She added: “Attempts to limit the effect of price hikes through promotions and discounts have not been enough to win back loyalty.

“P&G has also been affected by weaker spending in China, even for essential items and it’s also been hit by boycotts of Western brands in the Middle East. 

“So, the company is looking at other ways to keep costs lower and keep its profits ticking up.

“It appears shrinking sizes on some products, rather than hiking prices, is part of the strategy.” 

Procter and Gamble did not comment.

Yesterday The Sun revealed how Cadbury’s family treat bags of chocolates have shrunk down in size.

New packs appearing in recent months have seen the Crunchie axed from the selection, as well as the size reduced from 216g to 207g.

It is the latest chocolatey snack made by the manufacturer to shrink in size.

Cadbury‘s Brunch bar multipacks have also reportedly been reduced in size by a major 12.5%.

Traditionally shoppers were able to bag up a pack of five bars which in total weighed over 160g – or 32g per lunchtime treat.

But now the entire box weighs a whole 20g less with the bars now sitting at 28g each, an investigation by The Grocer has revealed.

The size reduction applies to all the flavours including their raisin, peanut, choc chip and Bournville choc chip choices.

Elsewhere, shoppers have been feeling the crunch after it was revealed that two of Kellog’s four different cereal pack sizes have gone down in weight by 50g.

A box of 720g Kellogg’s Corn Flakes boxes is now 670g and 500g boxes are down to 450g.

But the smaller 670g boxes are being sold at £3.20 in Tesco – the same price as for the larger box when it was sold in May.

Meanwhile, its 450g boxes are £2.19, while the previous 500g boxes were only pennies more at £2.25.

A Kellogg’s spokesman previously told The Sun: “Kellogg’s Corn Flakes are available in four different box sizes to suit different shopper preferences and needs. 

“As the cost of ingredients and production processes increase, it costs us more to make our products than it used to.

“This can impact the recommended retail price. It’s the grocer’s absolute discretion and decision what price to charge shoppers.”

Jars of Dolmio sauce reduced in size but remain the same price

THE latest example of shrinkflation sweeping across the UK has seen family favourite pasta sauce brand Dolmio adjust their packaging.

Their 750g jars are now 675g while 500g jars have been trimmed to 450g.

But despite the ten per cent decrease, the price has stayed put at £3 and £2.50 in supermarkets.

It has left customers unhappy at maker Mars, which advertises it on TV with the slogan, “When’sa your Dolmio day?”.

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One fan told The Sun: “It’s a family jar but now it’s smaller, so I’ve had to reduce the portions on every plate at the table.

“It’s really disappointing that companies try to hide this from their customers by making sneaky packaging changes instead of just being honest.

“In two months the price will go up again and it’s even worse of a deal.”

A Mars spokeswoman confirmed the changes, telling The Sun: “Like everyone, we’ve experienced significant cost increases across our raw materials and operations, something that we are continuing to see.

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“We have been absorbing these rising costs for some time, but the growing pressures we are facing means we needed to take further action.

“While it has been a difficult decision to decrease the weight of our jars, our priority is continuing to provide our great products, without compromising on quality or taste.”

Simplified advice can only be achieved if the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA) work together, according to an industry expert.

Ian McKenna, founder of Financial Technology Research Centre, made the statement today (8 October) at Money Marketing Interactive in London.

The FCA announced proposals to launch a simplified advice model last December to make it easier for firms to provide affordable personal recommendations to those with simpler needs and smaller sums to invest.

McKenna, who was part of a panel discussing the future of advice, said for simplified advice to work, the Ombudsman needs to be part of the process.

However, he queried whether the regulator would be willing to make that decision.

He said: “The reality for simplified advice is the regulator would never bring the Ombudsman along. The argument was always do less, charge more or charge less, but still have the same responsibility at the end.

“This why I’m saying, and you could argue with my response, we don’t need the movement of the [advice/guidance] boundary.”

McKenna added that attempts were made in the past to address the issue of advice gap without much success.

“There’s no example of that happening in the past 20-30 years. Why would it be different now? What worries me is a huge amount of effort will be expended on something that just isn’t economically viable,” he said.

McKenna said the sector needs to tread with caution on the advice/guidance boundary review to avoid the equivalent of PPI in the long-term savings market.

“I think if we just remove the boundary, that’s what we will end up with and that will be devastating to people for long-term confidence.”

Tom Selby, director of policy at AJ Bell, said the advice/guidance boundary review is a test for the Consumer Duty and an opportunity for the regulator to assess how the financial services sector is abiding by the core terms of it.

He said the regulator now has access to huge amounts of data on firms to hold them accountable on their Consumer Duty commitments.

“It’s on them to make sure that firms do ultimately understand their shareholders.

“When they look at the cost benefit analysis of ‘am I going to throw people into an inappropriate product or am I going to follow the Consumer Duty?’

“Besides, if I don’t follow the Consumer Duty, I’m going to end up with a huge fine and a bad reputation.”