What would it take for a YES vote?

[RobertT]

I have to say Fish, I shared your doubts about CDC initially, but having let the dust settle I happen to think it's got potential. CDC is never going to be as good as DB but then it's not pretending to be. However, it should be better than DC.

If we base things on pensionable pay of £20,000 for example:

With the CDC scheme we would be building up a lump sum of 3/80ths which is £750 per year, and a pension(unguaranteed) of 1/80ths, so that’s £250 per year. If you disregard any growth then after 10 years and in simple terms that’s obviously a lump sum of £7,500 and a pension of £2,500.

Now let’s compare that with a same amount going into a DC scheme, so a total of 19.6% of pensionable pay.

Each year there would be £3,920 going into your pot and again if you disregard growth and in simple terms, over 10 years that’s obviously £39,200.
If you want to take the maximum lump sum(25%), that leaves £29,400 to buy an annuity. If you want an income at 65 that increases with inflation and a spouses pension(the same as CDC aims for), your £29.4k would get you a starting pension of only around £1,000 per year. Without taking the lump sum it would be more like £1,400.

But in reality, the DC scheme is only going to have a maximum of 16% contribution rate, meaning £3,200 going in!

While I accept the above is a very basic example and there is more potential for shorter term investment growth with an individual DC scheme. The way I understand things is that the CDC plan would be run in a fairly similar way to a with profits fund, whereby investment fluctuations are smoothed over time, so we wouldn’t necessarily be too affected by major market changes. As long as the target return is averaged over time, then it should work as projected.

The question of how the scheme would cope with an ever decreasing full time membership, is really down to percentages. As long as there’s enough money in the pot to pay what we’ve accrued, then how many more part timers there are in the future shouldn’t be an issue. The biggest problem I can see is what's been a major failure of traditional DB schemes – longer life expectancy! That’s what would put pressure on retirees pensions, rather than the relatively modest average target growth.

The Pension Protection Fund only applies to eligible DB schemes. So I assume the CDC scheme wouldn’t qualify for it any more than a DC pension would.

Ultimately I think the choice comes down to, do you want the freedoms that a DC scheme offers, with the option of buying an annuity which offers very poor value for money. A majority of DC pension holders don’t buy an annuity since the pension freedoms were introduced in 2015, basically because they’re rubbish!

Or, do you want a higher, but potentially more risky income that comes with CDC.

[fishtank]

If the business was willing to agree to a CDC scheme with a guaranteed lump sum DB element and a contribution rate of 13.6% why wouldn't they have agreed to an individual DC scheme with a guaranteed lump sum DB element and a contribution rate of 13.6%? That doesn't make much sense. Why isn't/wasn't this option explored?

The quotes I'm getting for a £39k annuity are closer to(and some more than) £2k.

None of that is really the point though, the point is carrying the risk through into retirement, a frightening prospect for most members. Not the "wage in retirement" they thought they were fighting for when they voted 89% for strike action.

[RobertT]

If the business was willing to agree to a CDC scheme with a guaranteed lump sum DB element and a contribution rate of 13.6% why wouldn't they have agreed to an individual DC scheme with a guaranteed lump sum DB element and a contribution rate of 13.6%? That doesn't make much sense. Why isn't/wasn't this option explored?

There’s no such thing as an 'individual DC scheme with a guaranteed lump sum element' as far as I know, so introducing such a scheme would mean even more legislation.
In my opinion it’s going to be quite hard to convince the government to introduce the CDC scheme, a concept that already exists in other countries, let alone something completely new.

But I do think we should be given the opportunity to join the DC scheme on comparable percentage contribution rates(13.6%+6%).

The quotes I'm getting for a £39k annuity are closer to(and some more than) £2k.

I’m basing mine on a joint annuity at 65 rising by 3% and 50% spouses pension on death. £2k would suggest a level, single life annuity.

None of that is really the point though, the point is carrying the risk through into retirement, a frightening prospect for most members. Not the "wage in retirement" they thought they were fighting for when they voted 89% for strike action.

I’m not sure any of the CWU blurb actually said we would get a ‘guaranteed wage in retirement’. But nor do I don’t think it’s the deal of the century or game changer, or whatever Terry Pullinger described it as.

I agree that having a guaranteed amount, and an amount that is known up front is ideal. But CDC is still offering an income higher than the DC alternative, albeit with potential caveats.

As far as I’m concerned it is what it is, you either go with it, or you don’t.

[fishtank]

Robert as far as I can tell the guaranteed lump sum DB element of the proposed pension is simply a stand alone DBCBS ( possibly a continuation/evolution of the transition scheme) that will "sit alongside" the CDC scheme. It won't actually form part of it or follow any new regulations.

[RobertT]

I think I misread your post there Fish!

I don’t know if an individual DC scheme with a DB element was explored or not, but I think the reason it isn’t on the table is because the CDC scheme is seen as offering a better outcome. Pooling money provides higher returns and so a higher (unguaranteed) pension, compared to an individual DC scheme.

[fishtank]

I think the reason it isn’t on the table is because the CDC scheme is seen as offering a better outcome.

I think it's possible it may give better returns to some pensioners depending on the regulatory control but it won't provide security in retirement if pensioners have to keep one eye on the business and another on the stock market/bond market. I'm not sure that's a better outcome.

I could step away from this debate, like dingo the vast majority of my pension will come from DB so the affect on my retirement plans are negligible but I fear we're condemning those that come after us to years of fear and uncertainties.

The IDC scheme will likely close to new entrants when/if the CDC scheme opens, it's counterproductive to have an alternative scheme in place when you open a scheme that constantly needs new contributions to keep it running and that's the problem, can they keep the tap running both ways? This scheme will in my mind need an "estate" to kick start it if targets are to be met in the first 10 years. Where is that coming from?

I'm going to answer that one myself in another thread.

[stephen500]

For me, a ballot paper. I don't think we will get an improved deal.
But that is my point of view, as I have little time left in the business. However if I was young, I would prob want to know more about the proposed pension scheme and ask questions about the sick absence proposed talks. Personally I would like the option of continuing in the pension transitional arrangement, as it suits me with little service left.