CDC pensions could happen – if we put our minds to it.

hippie sister of Margaret Thatcher

Image by . . ..::PATO::.. . . via Flickr

An amazing post from one of my pension heroes “Big Hair”.

let’s pick up on collectivism and intergenerational solidarity. If you cut through the crap on CDC (collective defined contribution) these are the real reasons why it would fail. And much as I am a fan of CDC I think this is ultimately why they will fail in our current society.

 I see no evidence of intergenerational solidarity elsewhere. What about house prices being ridiculously high for young people – shall we reduce them. Certainly not, because that would be a transfer of wealth from old to young. And collectivism?? Ever science the blessed Lady Thatcher, I’ve seen nothing to persuade me that it’s not just “all about me”.
Don’t try to convince us that DB has the good merits at its heart, and hence it’s a good system. DB worked because people didn’t understand the real cross subsidies – or more likely didn’t want to understand because, as the pale, stale, males making the rules, they were the ones who benefited!

CDC is a great idea – but we need to face up the some of its central issues. BD doesn’t face up to them – it just hides them.

Now Big Hair spoke at a mallowstreet DC/DB debate on Wednesday and told us he’d not seen a major advance in pension design in 30 years.

I think he knows that CDC is the great leap forward. I also think he’s pulling the wool over our eyes on this intergenerational transfer issue. Another friend of mine, Deborah Price (twittering as Gerontology UK) has suggested that younger people need to spend more time hanging around their grandparents and being friends with them. I think I know what she’s getting at.

 I’m pretty sure that Deborah’s pushing at an open door. People I know want to look after their parents. The problem is acute right now with Long Term Care, its chronic with retirement income. 960,000 people reach 65 in this country this year – the first of a series of baby-boom Tsunamis. We have laid out the retirement carpet but the carpet’s faded,and full of holes. We’ve failed to come up with a collective drawdown system that provides pensions as effectively as DB  -Big Hair’s right on that.

Big Hair’s wrong to blame this on selfish youth or selfish oldies. It’s a matter or organisation and a matter of leadership.

And this is where I’m going to have my go at Big Hair who is a natural leader. If he troubled his mind to it, Big Hair  could work with you and me,  and a whole bunch of others to get CDC on the road.

IF- we put our minds to it we could organise NEST‘s TDF funds to provide collective DC, we could organised the PPF to provide collective DC , we could even get the bigger solvent occupational pensions to buy back some of their DC funds and pay them as scheme pensions.

How are we going to organise ourselves? This will not happen conventionally, it is going to happen because a bunch of guys and girls say, enough is enough, we can’t go on pouring good DC money down the drain on a hopelessly outdated, inefficient unworkable system of annuitisation.

Thought leadership is easy –  anyone can spout on blogs like this. Putting good ideas is hard, it requires determination, focus and ultimately time.

The reason we haven’t done anything about CDC in the past 30 years is not because we didn’t think it a good idea– it’s because we didn’t organise ourselves effectively and have the courage of our convictions.

That is going to change!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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10 Responses to CDC pensions could happen – if we put our minds to it.

  1. Hamish Wilson has also been trumpeting this cause, but it needs a very long term view, and the Government via NEST had the opportunity, but didn’t seize it. Instead we got a bureaucratic ‘maxi me’ of a typical 2010 DC !

    I suggested to the FT financial innovation competition a few years back that we should have an exchange, unitised, so that we can swap mortgages with annuities in £100 units, bit like .

    Maybe it could work for the DC pots we have got – turn them into 25 year repayment mortgages for the young at a fixed rate!

    • henry tapper says:


      I don’t suppose this will happen unless there is a public outcry against the wastage of individual annuitisation. Unfortunately there are a lot more people who stand to gain from the pertpetuation of the status quo than advocates for change. This is a case of ignorace being bliss for those involved in the current “at retirement” business.

      Of course in ten years time we will be looking back at 2011 wondering how we could have missed the opportunity of Scheme Pensions and Collective drawdown. No doubt, questions will be asked in the house and people will cite blogs like this as evidence that the Government and Pensions Industry purposefully neglected their duty of care to thos in private pensions.

      No doubt by then there will be new politicians and new industry heads who will sagely nod their heads, happy that none of this was on their watch.

      This is the way of the world Stephen!

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