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Three to five years until CDC is up and running, says industry

13 Nov 2018, 17:15 ... s-industry

It will take between three and five years before collective defined contribution (CDC) schemes are up and running, despite the government launching a consultation on the provision.

This week's 99 Pensions Buzz respondents also answered questions on the responsibilities and capacity of The Pensions Regulator, and whether defined benefit schemes should be simplified and standardised.


Collective defined contribution (CDC) schemes are between three and five years away from being up and running, say half of this week's 99 Pensions Buzz respondents.

Another 29% felt it would take two years, while 15% said it would take six years or longer. Just 6% believed such schemes could be operating by the end of next year.

Many of those who chose the majority option argued the government's legislative timetable would slow the process.

"The scale of challenge in getting suitably legislation (alongside Brexit priorities), regulations and authorisation up and running means I doubt a CDC scheme will be accepting contributions until 2021," said one.

Another, who agreed, also hoped it "gets kicked into the long grass" and added it "smacks of protectionism from those about to retire".

Of those who felt it would be in place by 2020, one said Royal Mail, which is a pioneer for the provision, could have it ready by then but others would be slower.

"Possibly sooner, but I can't see anyone clamouring for it," added another.


ust over half of respondents (51%) said they felt negative about the introduction of CDC after the Department for Work and Pensions (DWP) launched a consultation last week.

Some 23% said they were ‘very negative' and 28% were ‘slightly negative' about the proposal. One of the former said it was "a knee-jerk, hastily-constructed, poorly-thought-out, steaming pile of blindly-optimistic codswallop".

"It will only be suitable for a very small number of employers," said another who was ‘slightly negative'. "That said, it is also only suitable for those employers that have a high chance of longevity and I really do have my doubts that Royal Mail fits into that category."

Meanwhile, 41% were, to some degree, positive about the provision, with 11% ‘very positive' and 30% ‘slightly positive'.

Of the latter, one argued it was "potentially a good solution for a minority of employers still providing defined benefits".

"It is great to open up the debate and have a proper conversation about how to improve member outcomes," another said.

Another 8% sat on the fence.


Respondents were fairly evenly split on whether the industry expected too much of The Pensions Regulator (TPR) to act as a policeman to expect savers.

Just over half (51%) said that was not the case, while 46% agreed with the statement.

Of those who disputed the idea, there were suggestions that "more resource" or "some pragmatism" was required, while another added: "It is what regulators are there for."

Another said: "In lieu of a single regulator, TPR has needed an expanded scope and more resources for some times, as recent experience has made clear."

"A review needs to be kept on whether TPR has the right battery of powers, and adequate resources to implement these," said a further respondents.

And, of those that agreed too much was expected of the regulator, some said this was largely due to a lack of powers in some areas, while others lamented the divide of pensions regulation between TPR and the Financial Conduct Authority (FCA).

"It's about time people started taking some responsibility - it's always someone else's fault," said another.


A narrow majority (51%) felt TPR lacked the capacity to deal with clearance applications where a defined benefit (DB) consolidator, or superfund, sought to take on a scheme.

It comes after both The Pension Superfund and Clara said they would seek such approval in at least their first few transactions.

"Not in a million years," warned one responded. "Nine applications last year to what? 50? 150? 500? It doesn't have the resources or breadth of skills to get involved in commercial decisions full stop, let alone expediently."

"The applications are overly onerous," added another, while several pointed to adequacy of resources at the watchdog.

"But maybe the flow won't be that great when structures are finalised," predicted another.

Just over a third (37%) of respondents were unsure, however, with one stating it was necessary to wait for a government consultation on the regulatory framework to govern these funds.


Nearly three in five (56%) respondents said defined benefit (DB) pension schemes should not be standardised and simplified.

"A lot of work for no obvious benefit," said one, citing the cost of consultancy work that would arise.

A further respondent urged: "Make a bonfire of all the legislation and replace it with four sheets of A4. No limits and the trustees can invest in anything."

"Not broadly," one respondent said, "although legislation to convert all to the consumer prices index would be helpful."

"Dream on," said another, while wishing for such action to be taken.

Another two in five said they should be simplified and standardised, yet many caveated their responses, warning it would be a "nightmare task".

"It is lunatic to have the existing complexity which serves little purpose other than to honour ad hoc designs and slapdash historical legislation," another argued.

Others warned member protections would inevitably be weakened.

"That would simplify the industry and remove a lot of jobs - which may be a good thing, depending on your point of view," another said.

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