I can’t disagree with any of this Jonathan. I guess the proof of the pudding will be in the eating and when trustees see CDC working, they will adopt.
The issue is how CDC will get seeded without employer or trustee support and the answer is that financial institutions are waking up to their being able to pay more income under CDC than under an annuity and equivalent income as expected from drawdown with greater certainty. A lot of this is simply down to scale, but it’s also down to not needing to reserve and not being so restricted on the investment side relative to guaranteed benefits.
My guess is that CDC will take a couple of years to become mainstream but when it does- it is the natural place to invest accumulated DC savings.
Completely agree and think CDC will work because there is a demand for it. I would certainly look at putting my money into a CDC scheme. I don’t see what it has got to do with employers – I have already got pensions from 5 employers and will likely have more by the time I want to take money out and my decision on CDC or other vehicles is completely independent of the employer that is or originally deducted contributions from my pay.
Providers of retirement products will hopefully step up and meet the demand – some of those might be trust based but I wouldn’t expect many of the existing trust based schemes to switch completely although maybe some of the larger ones will offer a CDC option…
Thanks Alan
I think the obsession with employer sponsorship has rather blinded us to the fact that the vast majority of money in UK DC is in deferred or private pots!