Collective defined contribution (CDC) schemes should start with the outcomes they want to deliver, then work backwards to the portfolio behaviour needed to support them, the consultancy outlined in a new report.

CDC outcomes are not fixed in advance, as they are with defined benefit (DB), but, equally, they are not determined solely by each member’s own investment experience, as in an individual DC scheme. Instead, investment returns are shared collectively and feed through into future pension increases or, where needed, reductions.

The consultancy said this nuance changes how risk and success should be assessed. Rather than focusing on short-term market movements or volatility, CDC schemes should judge investment strategy by its…