Hugh Nolan, pensions expert, tells us
I am absolutely convinced that the time for CDC has come. Sadly I suspect it has gone again already.
Students of Einstein’s theory of relativity will have learned a nuance, the train is both approaching and departing the station. It’s time at the platform is “never”.
Not since TS Eliot wrote his Four Quartets, has such a gnomic utterance found it’s way into publication
“Time present and time past
Are both perhaps present in time future
And time future contained in time past.”
Hugh explores a pre-occupation of pension experts which is almost as curious.
He is the “do-nothing, do-gooder”.
Hugh has never , to my knowledge, remarked on the impending approach of “the time for CDC”, but now that Royal Mail are getting on with establishing a scheme, he is keen to tell us how idealistic it is
There is no doubt from a technical perspective that pooling risk and smoothing benefits in a CDC scheme could substantially enhance retirement income for participants
This improvement in outcomes presents a “new challenge” to DC, presumably because it improves DC’s outcomes. Just why re-making DC as something better might be a challenge isn’t clear, indeed Hugh suggests he is all for it.
The idealists are singing the praises of this middle way of pension provision, and so they should.
To understand why Hugh is both for and against CDC, and in the process re-writing laws of quantum physics, we need to be pragmatic.
There is no realistic prospect of any parliamentary time being available over the next few years, and I simply cannot see the government making CDC a top legislative priority with everything else going on.
What else is going on?
As Frank Field remarked in the Work and Pensions Select Committee, there is virtually no legislation being discussed, let alone being passed at the moment. The decks have been so completely cleared for Brexit that we might as well dispense with parliament altogether!
I have now seen a draft of legislative changes that would be needed to make the Royal Mail scheme happen and so have the DWP. The DWP will have, from tomorrow, dedicated civil servants tasking to bring secondary legislation through in a timely fashion.
If Hugh Nolan wants to know more, he can speak to me – or any of the other “idealists” who think that doing something is rather better than doing nothing.
Meanwhile back in the real world
In the real world of markets, Royal Mail’s share price has increased by 50%. Despite doom- mongering from Hugh, the market considers the CDC deal a done deal and on its back, Royal Mail is now worth £2bn more in investors eyes, than it was before it announced it had reached agreement with CWU.
Strangely, the market appears to be as idealistic as I am!
Perhaps the perplexity of all this can be reduced by reminding ourselves that CDC is in fact an upgraded version of DC , not some strange “middle way” between DB and DC and certainly not a way of de-risking DB. It is very much a “real-world” solution for people who want a pension and employers who can’t afford to guarantee them one.
The global markets have got this, sadly Hugh hasn’t.
TS Eliot and Hugh Nolan