Should accountants be bothered with CDC

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The short answer is “no” but be aware as your clients will probably ask you for your view!

Unlike the Treasury reforms that were announced in the budget, these latest reforms are technical and speculative and even pension geeks can’t agree what they are about.

So here in 500 words is the Pension PlayPen view on what’s going on.


For ages, Steve Webb, the Pension Minister has been trying to support the rump of old Defined Benefit Pension Schemes from shutting up shop. Partly he wants to protect the Pension Protection Fund from insolvent schemes and partly he wants the schemes to deliver on their promises to members.

He is trying to create the conditions for these schemes to be run off in what he calls “DB-lite” – this is one use for these new Collective DC (CDC) schemes. It didn’t meet with much enthusiasm among his civil servants (who saw this as the thin end of the wedge that might lead to ghastliness like DB-lite for them!

For ages, Steve Webb has been trying to make the workplace pension schemes set up for auto-enrolment (plus the few good schemes set up before 2012) MORE EFFECIENT.

He’s been badgered by people like me to look across the North Sea to Denmark, the Netherlands and Sweden where DC plans are more efficient. But every time he tried to speak up for these schemes he got whacked around the head by his Government Actuary and other civil servants for whom the idea of anything but a gilt-edged guaranteed pension was “bad news”

Then Gorgeous George Osborne decided (without telling Webb or anyone in his department) to take a wrecking ball to the whole Annuity Framework. 

Having demolished the building, something had to be built on the ruins. Steve Webb made it quite clear that he didn’t think that retail products like “income drawdown” were fit for purpose and back he went to his plans for CDC that can provide non-advised drawdown with more predictable outcomes at a fraction of the fully advised price- CDC.

So there are now three types of scheme which are to be presented to the British public in a pension version of the sausage sandwich game.

Do you want your pension paid high risk (Lamborghini), low risk (CDC) or no risk at all (Annuity)?

Or if you’re a company do you want to offer staff- high risk (conventional DC) , low risk (CDC) or no risk at all (DB).

It’s odd to see the Treasury and the DWP actually working to a joined up agenda, it’s actually quite good news for consumers.

What’s it to accountancy practices?

If you run a financial services arm, currently profiting from drawdown sales, this is probably bad news as CDC will take out a large chunk of the drawdown market- individual drawdown will have to raise its game- though the impact will be slow-burn- these CDC schemes won’t be arriving in a hurry

If you have clients with DB plans or old fashioned DC plans, these new CDC plans may be a convenient exit route. Though we have yet to see the detail

3.   If you have clients who have set up an auto-enrolment plan for their staff, this is probably good           news as it looks as if the options for members when they retire will be easier to understand and (with a bit of luck) CDC pensions will actually give better incomes for those in the “squeezed middle”

For a self-confessed pensions geek like me, CDC (or defined ambition as the DWP insist on calling it) is all rather exciting, it’s my i-phone 6!

But if you aren’t – (I’m glad you have a life), the message is this

“Don’t believe the scare-stories about the Dutch rioting in the streets about CDC- these CDC pensions are a logical next step following the budget reforms, they will be good news for ordinary people and, though in the short term they may restrict the sale of retail drawdown, ultimately they will help restore people’s confidence in workplace pensions.”

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About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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