Parliament debates CDC -with a twist in the tail!


If you are generally interested in the way Britain will develop private pensions in the next twenty years, I would strongly recommend watching the two sessions of the General Committee reading the Pension Schemes Bill,

The link to the video is here- fast forward the first two minutes that have no sound.

In particular I would suggest you watch the first session, which includes contributions from David Fairs of KPMG, Hilary Salt and Derek Benstead of my firm-First Actuarial, Stefan Lundbergh of Cardano and David Pitt-Watson of the RCA.

There are questions from a number of MPs including Steve Webb and Gregg McClymont and some healthy scepticism from Richard Graham MP

If I have one takeaway from the two meetings. If collective DC schemes are going to flourish in the UK, they will need to fix the problem with DC and the problem with DC is not just the “cliff-edge” of annuities but the lack of certainty from drawdown.

For those critics of CDC who want to hear answers to concerns about the communication of the benefit promise, listen to Derek Benstead’s explanation. For the views of Homer Simpson not Homer Economicus listen to Stefan Lundbergh. For a really good explanation of the employer’s position – specifically the desire of employers to use CDC as the back end of existing workplace pensions- listen to David Fairs. Finally, for a clear statement of why people can expect better outcomes from CDC than from annuitising DC schemes- listen to David Pitt-Watson’s opening remarks.

The second video deals with the Guidance Guarantee and has much to say about the Guidance Guarantee, especially from Sue Lewis , Chair of the Financial Services Consumer Panel. Jim Bligh of the CBI and Martin Lowes of Aon Hewitt speak of CDC but there’s is a different vision of the purpose of the collective. At one point Steve Webb interjects to suggest that it is infact the risk-sharing schemes that offer alternative guarantees to DB that might be of more interest to the employers Jim is talking to.

If my major takeaway from watching these two hours of video was that CDC is the answer  to the problems with DC, then perhaps Richard’s plea for a “default decumulator”  to which DC defaults can point will be an investment strategy, it will be a different kind of pension scheme.

It is the discussion in the final minute of the video (15.57) when Martin Lowes waves a flag for people with multiple dislocated pots and Sue Lewis a flag for the self-employed. These are the people for whom CDC has most to offer- and about whom we hear the least.





About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Parliament debates CDC -with a twist in the tail!

  1. Tony Filbin says:

    Henry,I must have watched a different video.Far from David Pitt-Watson giving a “clear statement” of why people could get better outcomes he was immediately rebuffed by Stefan for not comparing apples and apples and by one of the select committee who pointed out that the back testing to the 1930’s with assumed investment paths had very little relevance.At least Hilary pointed out the risks of inter-generational transfers and that to prevent this there would only be a 50% chance of achieving target incomes (a stable outcome ???)
    A question for you – why don’t First Actuarial set up a CDC?

  2. henry tapper says:

    We don’t know what the rules are just yet! We are talking with administrators, platform managers and we’re doing some detailed thinking about how you can be fair to all (including those who want out).

    But no-one will be able to set one up till Q2 2016 – (DWP’s best estimate)

    DPW – no (further) comment!

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