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One in eight organisations keen on CDC adoption

08 Apr 2019, 12:15 ... option.php

Around one in eight companies have said they will adopt a Collective Defined Contribution (CDC) pension scheme of some sort by 2025, a survey from Willis Towers Watson (WTW) has found.

In a poll of 70 organisations, 13 per cent said that it was “very likely” or “likely” they would provide CDC benefits within the next six years, after the government gave it the green light last month.

According to WTW, those most likely to provide collective benefits are firms which have both defined benefit and defined contribution pension plans in place, suggesting that not just those with a DB arrangement in place, such as Royal Mail, will be interested in the initiative.

WTW Retirement senior director, Simon Eagle, said: “New things usually take time to catch on. While only a minority of organisations are expecting to be part of the first wave of CDC benefit provision, our data shows that most organisations would like to provide their employees with a regular income in retirement rather than a flexible pensions pot.

“This suggests there may be further appetite for CDC provision in the longer term.”

Furthermore, the survey found that 34 per cent participants said their members would struggle to understand the nature of CDC.

In the government’s response to the consultation, it highlighted the need for schemes to “have a robust member communication strategy”.

Legislation for CDC is likely to be included in a bumper pensions bill, expected towards the end of the year.

The initiative has been spearheaded by the Royal Mail, backed by the Communication Workers Union (CWU), after it drew up the plans for its 140,000 employees, based on the “world leading” pension systems in the Netherlands and Denmark.

Once it has ironed out any issues with the Royal Mail trial, it will look to expand CDCs to master trusts and multi-employer pension schemes.

One in eight organisations keen on CDC adoption

08 Apr 2019, 15:28

Yes because they will have an excuse to pay peanuts out

One in eight organisations keen on CDC adoption

08 Apr 2019, 21:00

My money is on this scheme being a bit of a disaster. With no guaranteed outcome/ income due to the flexibility to reduce or suspend increases. Reducing incomes in retirement etc. I don't think it will be long before RM find a reason to reduce our incomes during retirement,. Then what? How long would a reduction last, six, seven, maybe ten years of your retirement? With an NRA of 67, or is it YOUR State Pension age? I can see many being left in poverty with this.

One in eight organisations keen on CDC adoption

09 Apr 2019, 08:04

The target growth rate of the CDC pension is only CPI+1%, with the most recent CPI figures being 1.8%, obviously making a total of 2.8%!
In my opinion, that isn't a particularly high or unachievable rate!

History tells us that over the longer term equity investment is a good way of making your money grow, as this example shows.

In practice there is always going to be short term volatility when it's possible to see your money rise or fall in quite large amounts/percentages. But any pension investment is generally for a long time, and the longer you're invested, the more likely you are to make healthy returns.

Personally I consider myself to be a fairly passive investor, mainly via funds, but have made substantial gains over the approximately 20 years I've been doing it. Therefore I think the idea that our CDC pensions are going to go down year on year, or even be reduced to £0(as some seem to think), is way off the mark.

There will be a valuation once a year to decide if our pensions rise, fall or stay the same, and that will be based on investment performance both actual and expected, as well as any changes in life expectancy, etc.
Ultimately it'll be up to the pension trustees and their advisors to make those decisions.

The only way RM could affect things is if they decide/have to pay in a lower percentage of pay, meaning the scheme has to provide a lower accrual rate going forward. Which depending on how the company performs over the coming years, is always a possibility. But that is true of any type of pension – it could also apply to our wages!!!
The whole point of CDC, is there will always be enough money in the pot to pay for our pensions(even if RM go bust), how ever much they're going to be worth.

DB is obviously the the preferred option and we're going to be the guinea pigs with CDC, which doesn't exactly fill me with joy. But the only other viable alternative was an individual DC scheme which would just offer a pot of money, with the choice of buying a lower income with an annuity, or drawdown.
And if they took the 2nd option, how many would spend it all within a few years?
At least CDC is attempting to provide something closer to that preferred option!

* The NRA with CDC is 67. The CWU's original WinRS proposal had an NRA of state pension age, meaning anyone who's currently in their late 40's or younger would have to wait until at least 68.

One in eight organisations keen on CDC adoption

10 Apr 2019, 20:39

Surprised it's only one in eight . Not that quick are they?
All pension risk transfered to workers ,money gets more money guaranteed . The justification for profit reward used to be the risk assumed ;without the risk ,what is the justification?

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