This is a transcript of Figure 1 in the draft CDC code which sets out the key authorisation criteria and how they relate to each other.
For a collective defined contribution (CDC) scheme to be authorised it must meet all of the authorisation criteria. We have divided these into two categories:
- governance, which covers fitness and propriety, systems and processes, and member communications
- value, which covers continuity strategy, financial sustainability and sound scheme design
The assessment of the scheme design as sound relies on the actuary’s report, investment strategy, and modelling and testing of the scheme’s design and these are all interlinked.
There are key questions that applicants for authorisation need to answer satisfactorily for each criterion:
- Fitness and propriety: Are the trustees competent and honest?
- Systems and processes: Is there good IT functionality, data control, quality assurance and risk management? Is there effective administration of resources – people, service providers and costs, assets and liquidity plan (CALP)?
- Member communications: Is there open feedback and reporting between trustees and members? Do members understand the scheme design and risk to benefits?
- Continuity strategy: Are members protected after a triggering event – whether by wind-up, resolution or closure?
- Financial sustainability: Are there enough reserves to operate the scheme before and after a triggering event?
- Scheme design (including viability certificate and viability report): Is the scheme design sound, is there sufficient evidence of this and have the gateway tests been met?
There are also some key links between the criteria. This means that changes to one criterion can impact another. It also means that when it comes to assessing whether to authorise a scheme we take a holistic approach and don’t consider an individual criterion in isolation.
The key links include between:
- fitness and propriety and scheme design
- systems and processes and viability report
- systems and processes and continuity strategy and financial sustainability
- member communications and scheme design