I was at a CDC Forum yesterday with people from the DWP and various pension experts, I can’t say who or what they said but suffice it to say that this was “large employer stuff”.
Necessarily this is where the action is today. The legislative timetable for the introduction of CDC depends on the outcome of a consultation which we expect to be issued in October and completed by Christmas. The agenda for the Queens Speech in 2019 will be decided by the readiness of potential policy items to be debated and agreed in the following year. CDC – if it is to be available to Royal Mail, is already on a delivery fast-track that involves intense focus on the matter in hand – Royal Mail’s ongoing – but temporarily interrupted – dispute with its principal union , the CWU.
But as Michael Johnson has rightly pointed out, we don’t legislate to avoid industrial action. CDC legislation must open the door to a wider constituency than the 143,000 staff at Royal Mail.
Which is why the legislation must be written in such a way that other “CDCs”, can be delivered and why consideration must be given to those who wish to transfer money into CDCs which they’ve built up in DC pots.
If , as I believe , CDC represents the default pathway for the majority of the population to spend their DC pots, then it should be high on the agenda of the FCA who in their various ongoing consultations, are looking at how we can include those who neither have access to advice or a solid DB pension.
The Pensions Minister should be particularly interested in this section of the population as they are most likely to be financially excluded and will face the prospect of 30 + years in later life “just getting by”. They are directly in the line of sight of a Government dedicated to helping such people.
So I was surprised – and said so – that there was no-one from the FCA in the room. In as much as I work for much of my time, with individuals struggling to make sense of their pre and post retirement options, I know that mature savers need a firm steer with regards options.
Though the prospect of delivering a “general purpose” CDC scheme, into which people can transfer their retirement savings is several years away, the policy decisions which need to be taken to ensure CDC fits into the overall retirement framework, are needing to be taken in the next six months.
It is critical to the long-term outlook for savers such as myself, that we are not just given consideration , but an assurance that the legislation will be in place – to plan on CDC as an option. We do not want people taking “wage for life” retirement decisions based on the binary choice between drawdown and annuity, if a third way will be available to them.
So I urge the Pensions Minister to ensure that the FCA as well as tPR, are fully appraised of the legislative timetable, that they are consulted with and that any problems that they can see in the operation of a retirement framework that includes CDC as an individual option, are identified and dealt with.
Whitehall is notorious for operating in silos, but ordinary citizens do not differentiate between the policy agendas of HMT and DWP or the regulatory agendas of tPR and FCA. We would like this pension policy carry not just cross-party support, but cross-departmental support.
I have written as much as I can – while under the Chatham House rule. I will be able to write directly to those who can ensure the policy agendas are aligned. CDC is too valuable an opportunity to be confined to one or a small group of occupational schemes. It is a way for everyone struggling with the “nastiest hardest problem in finance” to get the comfort of retirement security through the mutuality of investment and mortality pooling.
It is the mass market retirement solution that DC needs to upgrade itself from a retirement saving vehicle to a pension plan.
It is the way to bring pensions back into retirement planning and it should be embraced by all departments and all regulators.