Consultation on delivering Collective Defined Contribution (CDC) schemes
17 Jan 2019
We welcome the proposal to introduce Collective DC pension arrangements in the UK. There are undoubtedly benefits from pooling risks in order to drive better outcomes for members of UK registered pension schemes. We comment on the specific question raised in the consultation document later in our response but our key points are:
- The proposals are very restrictive, only enabling single employer schemes covering both pre and post retirement. We would prefer a broader framework making way for Master Trusts to offer CDC sections. In particular, feedback from our clients suggests that this would be attractive.
- We believe the benefits of CDC are greatest in the areas of longevity and investment risk pooling post retirement. As such, we recommend that post retirement only arrangements are permitted, with the option to accept transfer in from traditional DC schemes. This would help DC members better manage their savings post retirement in a market that is currently not well served.