The intention of the government to introduce collective defined contribution (CDC) schemes through the ‘Private Pensions’ bill was announced as part of the Queen’s speech today.
I am essentially pro-choice on pensions, so I welcome the CDC option for employers and members alike. It won’t be right for everyone, but it is clearly going to be welcomed by some. So, if this helps the overall pension savings culture by attracting new engagement from employers and individuals, then all the better.
Many commentators are suggesting the pace of change is too fast. The pensions industry has lost the right to dictate the pace of change by failing to react to clear warning signs from government and the obvious lack of confidence from consumers in the existing market place. Instead, the industry must cooperate and embrace change and show that it can add value to consumers and employers. The temptation to over-complicate matters must also be avoided.
We need to look at what is proposed in detail but should be able to shape the UK’s CDC model to learn from others’ mistakes and look out for what consumers want, not what we want to give consumers.
Nor should we be afraid of shouting from the rooftops on the potential pitfalls of CDC.
The one overriding concern is that the employers’ blank cheque book needs to stay firmly locked in the drawer. Many businesses have been crippled by the problems associated with defined benefit pensions and any chance of CDC following the same path needs to be closed off.
So, welcome the option, watch for the detail.