Easy on the baloney – Baroness!


The DWP’s official line on CDC is that it would be a change too far for a pension industry struggling to deal with change. This from a Government about to radically simplify the taxation system.

 ..we have decided that the time is not right to implement Defined Ambition, Collective Benefits and Automatic Transfers. The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively. The market needs time and space to adjust to the other reforms underway and these areas will be revisited once there has been an opportunity for that to happen.

But in an interview with Professional Pensions, Ros Altmann makes it clear that CDC is not going to be available to the pension industry, let alone the general public till 2018 at least.

“If this shift had happened ten years ago then we might have seen interest but even if we were to work full pelt on CDC then we wouldn’t even have regulation in place by 2018.”

So what are the DWP and Ros Altmann talking about?

On the 25th November, the Government is going to announce the Departmental budgets including the revised budget for the DWP. My guess is that the team of bright lawyers who have been working on CDC are for the chop, or at least for redeployment (with others for the chop). If I am right – my heart goes out to Jo and Ronan and the team).

And here’s the tragedy. By 2019, we will be four years into the Pension Freedoms. So far around 1 in ten of those exercising freedoms and few more than that are actually using their pension pot to create a pension.

Fast forward four years and we are going to have an awful lot of people with an awful lot of money and no obvious way of converting to pension. These are the 62% of us , Aon have surveyed who want a certain income in retirement without buying an annuity or employing an expensive adviser to manage it.

I am very afraid that the CDC project has been put on hold to save the Department of Work and Pensions a few bob.

I fear that in four years time when we are all heavily sick of drawdown going wrong and annuities stuck at current conversion rates, we will rue putting CDC on hold.

The trouble with CDC is that it has been presented to the nation – especially by Steve Webb- as a halfway house between DB and DC – as if employers want to spend a whole load of money on their staff’s retirement.

Employers don’t and won’t. They will spend enough because of auto-enrolment and (for the more affluent) because of reasonable contribution rates. The problem is not with employers, it is with the employees who have no means to spend their pensions.

They deserve a little research and development from the private sector, that it has had from firms like First Actuarial and Aon. It deserves a little regulatory work from Government. That  it has had – so far.

The work from the private sector has been done pro bono (for the public good). Sadly it looks like it has been donated in vain.

Short-term thinking from the Pension Minister.  Contradictory messaging from the Minister. Not much good to say about the whole rum business!

About henry tapper

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