Time for a DC upgrade?

upgrade underway

I was wading through yet another long and technical explanation of CDC  when I got my Eureka moment!

I don’t want a CDC plan, I want a DC upgrade!

I’m not dissing legal eagle Sandeep Maudgil (who’s soon to appear before the Work and Pensions Select Committee to opine on what CDC is).  Sandeep works for Slaughter and May (who can charge more in an hour than most of us work in a week). Sandeep is a brilliant lawyer who can explain CDC in the context of the Netherlands, Canada and UK DB legislation. The trouble is, the only people reading his article are people like me and the other friends of CDC!

CDC has become a playground for academic and legal experts intent on displaying their technical proficiency. For years it has been discussed by actuaries as a way of de-risking Defined Benefits.

Sandeep’s article (ironically in that most pragmatic of papers – FT Financial Adviser) is summed up in three “key points”

  • CDC schemes might be an alternative to defined benefit schemes
  • In a CDC scheme, the actuary is asked what rate of pensions members can reasonably expect to receive
  • CDC schemes are widely used in the Netherlands, Denmark and certain parts of Canada.


We are told

“the impetus behind collective defined contribution is the idea that the UKs’s current legal framework for occupational pensions is too binary”


The article has its moments, where I can get excited but again and again it shows it is being written from the perspective of someone immersed in defined benefit culture. It sees CDC’s challenge as

getting people in the UK accustomed to a new form of pension arrangement where pension amounts are only targets rather than being guaranteed entitlements, and where pensions might reduce once in payment.


Most people in the UK do not have an occupational pension that gives them these guaranteed entitlements. Most people have a combination of workplace and non-workplace DC pensions that guarantee them nothing but the freedom to go and buy a financial product like a drawdown plan or an annuity!

I’ll say it again – I want a DC upgrade!

It’s time that ordinary people wrested control of the CDC arguments from the actuaries and lawyers and academics and applied them to their own personal circumstances.

I want a DC plan that pays me a wage for life. I don’t care about binary occupational plan options, I don’t mind that CDC pensions aren’t guaranteed, I just want a simple way of converting my DC pot to a DC pension.

I don’t want this kind of rubbish “non workplace pension”!

value chain

I don’t want a workplace pension that isn’t a pension at all!

Every night I have to watch the DWP tell me on the TV to “get to know my workplace pension” and every night I ask – “what workplace pension?”. My workplace pension pays me a pot not a pension.

I don’t want a workplace savings pot – I want a workplace pension !

workplace pension 5

what pension is that then?

I’ll say it again – I want a DC upgrade!

I want freedom to do what I want with my pension , but I don’t want the freedom of a “pot”! I want in retirement , what I had in work, the payment of regular amounts into my bank account so I can budget with a degree of certainty. I want a wage for life.

What Dutch actuaries, or Canadian lawyers or Danish and German regulators are getting up to , is of absolutely no interest to me. I don’t want to know thanks very much.

I want a DC upgrade so that I know that when I come to draw my pension , there’s a pension there to draw – and I don’t want ever to have to buy an annuity!

I’ll say it again – I want a DC upgrade!

So when I read that 142,000 postal workers are going to have a CDC plan, I try to work out what that means and how I can explain CDC to a postal worker (more specifically my postman).

It’s so simple – it’s a workplace pension that instead of paying out as a pot – pays out as a wage for life. It’s an upgraded workplace pension suitable for people who aren’t pension experts.

  • Does it stop people who want to be pension experts transferring their money into a SIPP? NO

  • Does it stop people who want to give their pot to a financial adviser to manage? NO

  • Does it stop people like JR who want certainty exchanging the CDC pension for a guaranteed annuity? NO


What the Royal Mail and the CWU have agreed upon, is a solution to 142,000 workers joint problem, they did not want a pot but a pension.

The Royal Mail could not afford to guarantee the pension, but they could afford a generous contribution into the pension plan so that the potential pensions look good.

The members were prepared to take their chances on the markets and have accepted the defined contribution and are prepared to collectively underwrite the risks of the “hardest nastiest problem in finance”.

Somewhere in the background are actuaries, lawyers , regulators and the odd academic, making this happen. But this is not, and should not be about those clever folk, it should be about people like you and me and our money!

CDC is a DC upgrade and the best thing to happen to workplace pensions since auto-enrolment! I commend it to the House!

upgrade underway

I want a DC upgrade please!

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in annuity, CDC, pensions and tagged , , , , , , . Bookmark the permalink.

3 Responses to Time for a DC upgrade?

  1. Doug Mullen says:

    You report Sandeep as saying that the challenge is getting people used to a target pension rather than a guaranteed pension. For those of us in DC schemes, this isn’t a change at all. Is this challenge being overplayed?

    Liked by 1 person

  2. henry tapper says:

    If you are advising people in workplace pensions on their retirement options , you are a rare beast! Most people don’t get that luxury!

    Liked by 1 person

  3. Pingback: Auction Work Visas After Brexit – Adam Smith Insitute (ASI) – John Gelmini « Dr Alf's Blog

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