Pensions Minister Steve Webb believes the scheme, modelled on a system used in Holland, will benefit savers.
But a number of finance firms have expressed serious reservations about the idea since it was confirmed yesterday by the Coalition.


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The measure, one of a range of pension reforms to be included in the legislative programme for the remainder of this Parliamentary term, would allow workers to pay into funds shared with potentially thousands of other members to reduce costs.
Supporters argue that pension incomes will be higher due to lower costs from running collective, rather than individual funds, but opponents believe the benefits are unproven and uncertain.
Will Aitken, senior DC consultant at Towers Watson said: "Collective Defined Contribution is sometimes presented as a magic wand that can make everyone better off in retirement but the government has never been convinced of that.
"It is often taken for granted that CDC schemes will benefit from economies of scale, but using the word 'collective' doesn't make a scheme big.
"In other countries, CDC schemes have got big quickly by converting existing defined benefit pensions without members' consent. That won't happen in the UK."
Andrew Pennie, marketing director at Intelligent Pensions, said: "Many employers may well accuse the government of putting the cart before the horse when it comes to CDC schemes as this initiative should have been announced before auto-enrolment began – many employers for whom CDC could be appropriate have already gone through a painful and costly auto-enrolment process.
"The big downside of CDCs is the lack of sophistication and ability to tailor benefits to an individual's bespoke circumstances. It is interesting that some Dutch commentators are now speaking out in favour of the UK's individual pension scheme approach rather than their CDC scheme approach."
Simon Nicol, pensions director at Broadstone Corporate Benefits, said: "On top of the myriad of pension changes still facing employers they will not thank the Government for throwing this unexpected curve ball. It is difficult to see many employers being enthused about introducing yet another and unfamiliar pension arrangement.
"If the basic aim of these proposals is to get people saving this added complication from the Government could well end up being counterproductive."
Bob Champion, retirement product lead at Skandia, part of Old Mutual Wealth, said: "The introduction of Defined Ambition, including Collective Defined Contribution adds further layers of complexity for the average person to get their head around.
"Furthermore, the impact of such schemes will not be known for some time, it will be when those who started contributing at a relatively young age come to require an income from their scheme. This could be in 40 years or more."