Ideas on how Collective Defined Contribution pension schemes
could be extended to more savers were explored with industry
partners today by the Minister for Pensions.
Speaking at the Royal Society of Arts (RSA) Collective Defined
Contribution (CDC) Forum today about the road ahead for CDC
schemes, the Minister highlighted how the regulations will come
into force on 1st August, and discussed the ways in which the
next phase of CDC schemes might be taken forward with a
consultation planned later this year.
Minister for Pensions said:
CDC schemes have the potential to transform the UK pensions
landscape and deliver better retirement outcomes for millions of
pension savers.
I firmly believe that we should capitalise on the enthusiasm that
is building for extending CDC to other types of pension scheme,
such as multi-employer schemes and Master Trusts.
I am keen to move quickly, but we must get this right if it is to
work. That is why I am calling on all those who are seeking to
deliver the full benefits of CDC to work with us to help make
this a reality.
David Pitt-Watson and Hari Mann, co-chairs of the RSA’s CDC forum
said:
People who save for a pension typically want to secure an income
which will last them until they die, not just to be presented
with a cheque when they retire. That is what CDC pensions are
designed to do. The government is to be congratulated in creating
regulations which allow everyone to benefit from well managed CDC
plans. The evidence suggests this can transform retirement for
millions of people.
CDCs work by employers and employees contributing to a collective
fund from which individual retirement incomes will be drawn.
These collective funds can be invested in what are called ‘higher
return seeking assets’ over a longer period than traditional DC
schemes, benefiting the growth of the fund and its members.
Currently, regulations will provide for single and connected
employer CDC schemes. Some parties have already expressed an
interest in pursuing multi-employer CDC schemes as an offer for
their members, as well as proposals for Master Trust and CDC
models which offer ‘decumulation only’ (when pension savings are
converted to retirement income).
Later this year, the Department for Work and Pensions (DWP) aims
to consult on a package of prospective design principles and
approaches to accommodate new types of CDC schemes. This will
bring the potential benefits to more savers in the UK in an
appropriate way, while also capitalising on the enthusiasm
industry have shown for innovation in this area.
