CDC could offer members greater certainty around retirement outcomes, according to new report

Nov 29, 2018 | News

The Pensions Policy Institute (PPI) is today publishing “What is CDC and how might it work in the UK?”, a report which explores the defining features of Collective Defined Contribution (CDC) schemes, as well as the potential benefits they may offer and the hurdles they are likely to face in design and operation. This report has been sponsored by Royal Mail Group and the Defined Contribution Investment Forum (DCIF).

Responding to the publication of the report, Jon Millidge, Chief Risk & Governance Officer, Risk & Governance, at Royal Mail, said:

“Royal Mail is delighted to have sponsored such a thorough piece of research on CDC pension schemes. It has been clear throughout that there are a lot of lessons to learn from other countries’ experience. As the report makes clear, the UK experience of CDCs won’t be the same as in other countries, with our own legal, cultural and industrial context.

“We and our union, CWU, agreed that CDC is the right option for our 141,000 employees. One of the key elements in developing our scheme has been to ensure decisions are made in the interests of all scheme members without bias to any particular group. Critical to this is transparency and communication – rightly, major themes in this project.”

Vivek Roy, chair of the DCIF, said: “CDC is well and truly back on the agenda in the UK, thanks to Royal Mail’s plans to develop a CDC scheme and the government’s plans to facilitate these plans through legislation.

“As a group which is dedicated to promoting better understanding of UK DC pensions, we feel that CDC is a complex area. We hope that this report helps to clarify some of the confusion around CDC and set the scene for its consideration in the UK. In large part, confusion has arisen because CDC has evolved in different ways in different countries. In some cases, difficulties have arisen around how it is interpreted, creating intergenerational conflict. This reinforces the importance of clarity and consistency in how rules are set and implemented.

“While CDC cannot be identified as the right solution for everyone, from an investment standpoint a CDC structure could help to solve some of today’s challenges. With the pressure removed to provide savers with daily pricing, CDC could facilitate better access to illiquid asset classes and longer-term investment horizons, providing better outcomes for retirees.”

The PPI report ‘What is CDC and how might it work in the UK?’ is accessible here. For more information about the report, please contact Louise Farrand: [email protected].

The asset managers that make up the DCIF are committed to promoting investment best practice within DC pension schemes.