Rob Harper, Partner at Hymans Robertson comments on the Government’s response to its consultation on delivering CDC pensions:

“Attaining an adequate, sustainable retirement income continues to challenge many UK workers since the shift in the balance of risk across from employers to individuals.  There are clear benefits to be had from pooling of these risks across individuals and today’s commitment to CDC from the Government is a step in the right direction. Compared to annuitisation and drawdown, CDC could potentially deliver more sustainable retirement incomes in an alternative and pragmatic way by pooling risk for members, particularly in the later stages of their retirement. However, the advantages of CDC in the pre-retirement ‘saving’ phase compared to current DC schemes remain less clear.

“Ensuring clear member communications and strong governance are vital if CDC is to succeed and I’m glad the Government has recognised this in its response. Pension provision is already far too complicated for many savers to fully understand and early transparency from employers and providers will aid member understanding of what CDC really means for them.

“The Government has also acknowledged industry concerns that its original proposals may be too restrictive by limiting CDC to single-employer schemes and I welcome their commitment to looking at this again in the future. Widening this criteria to include vehicles such as multi-employer schemes and Master Trusts may allow them to consider offering CDC sections to their members, which we believe would be an attractive proposition for both schemes and individuals.

“CDC is not a ‘one size fits all’ solution and I’m pleased the Government understands this. The sheer scale of assets and membership required to pool risk safely will limit this option to only the very largest schemes such as the Royal Mail or other arrangements that can achieve sufficient scale.”