01 Feb 2020, 18:20
RobertT wrote:Woody Guthrie wrote:In a way I think CDC is a bit like drawing down a normal individual DC pot.
Without the individual control over where that pot is invested and with the added twist that it's not an individual pot at all.
A better analogy is a pitcher of beer and 6 straws, as long as there's a barman (contributing members) around to fill it up and nobody spills too much (poor investments) we can all get drunk but the rate the barman fills the pitcher will determine how much comes through the straw.
And if you read the rest of what I was saying, and put it in context, you'll see that I was saying basically the same as you. :In a way I think CDC is a bit like drawing down a normal individual DC pot. The money is invested and you take out a certain amount each year. If the value of your investments go down you either:
Take out a smaller amount to allow for that reduction; or
You take out the same amount and potentially let your pot decrease quicker.
CDC pensions take the first option.
The whole point of CDC is there doesn't need to be money going in all the time(that is more akin to a DB scheme). Whatever is in the pot will be shared out on a proportional basis. If the investment targets aren't met, our pensions will go down.
01 Feb 2020, 18:32
01 Feb 2020, 18:48
Woody Guthrie wrote:That kind of goes to the heart of the issue heapsy, this new pension neither has the security of a DB pension or the individual control of a DC pension pot.
You could argue it's a necessary evil but it's certainly not an ideal solution and could possibly end up being the worst of both worlds.
A lot has been made of the Dutch model but an occupational pension in the Netherlands is a smaller proportion of retirement income and many of their CDC pensions have had to merge to stop administration costs eating up a large chunk of the fund. I would predict that RM will be hoping other companies join the fray otherwise they'll be isolated.
01 Feb 2020, 18:59
02 Feb 2020, 02:01
Woody Guthrie wrote:That's another worry, there are no gaurantees that RM will provide a primer for the fund or any long term assurances that they will maintain their contribution levels.
If I were a 20 year old I would still enter the scheme, free money is free money but I would designate it as no more than 20% of my retirement income and start looking at other options along side it.
Changed days sadly.