CDC – a silver wage not a silver bullet


silver bullet

Yesterday Ros (Baroness) Altmann hosted a webinar on retirement income which prompted some interesting follow up on social media. Here’s Mark Ormston of Retirement Line.

I thoroughly enjoyed listening to Ros Altmann on the ‘future of retirement income’ masterclass on Asset TV this morning. I wholeheartedly agree that retirement income solutions should be bespoke to meet each individual consumers needs. It is unlikely we will ever see a one size fits all/ silver bullet product.

Retirement Line are a great outfit, an annuity broker and financial adviser in Peterborough who are one of the few organisations that have the capacity to help people with their retirement choices.  I don’t take issue with Mark and his work, but I do take issue with the premise that we must all make our own way home

Ros’ view is fine so long as we have the capacity to be our own chief actuary. For those who don’t have this intellectual capacity , financial resilience or access to a good adviser, there remains a problem. It’s a problem I’m raising money to solve

And – you’ve guessed it – one of the solutions that I hope will develop, as AgeWage develops is – if not a silver bullet – a silver wage in older age. I refer to the creation of decumulation only CDC schemes capable of providing a wage for life for people who in years gone by would have bought individual annuities.

And here I am swimming hard against the tide! I got home last night – exhausted after a session in the gym to be assailed by the missus’

“Have you been peddling that pernicious filth about CDC again? I’ve had my CIO telling me you were promoting it at a conference he was at. Have you any idea the reputational damage you are causing me….” and so on.

I expect I would get the same reaction if I was partner to Ros Altmann or most of the financial services industry.

Which does not bode well for lunchtime when Terry Pullinger of the CWU and Hilary Salt of First Actuarial will be selling the Royal Mail CDC solution to a sceptical audience at the PMI’s “Pensions Aspects Live” conference.

So why is CDC so contentious? What is it that gets on people’s goat? Why does the pensions industry so utterly object to it? It’s a mystery to me!

Here are five inherent contradictions in people’s positions on CDC

  1. People say it is jobs for actuaries, people who pay actuaries a fortune to design DC products and help manage DB liabilities. The world needs actuaries guys – live with it!
  2. People say it’s with profits in disguise. Even if it is with-profits (which it isn’t) what is wrong with transparently smoothed returns from an equity rich open investment. Does anyone think that drawdown from a SIPP  is without risk?
  3. People say it’s an intergenerational transfer. Show me any long-term investment scheme that isn’t. The question is which generation feels it is subsidising the other, in my experience every generation thinks it is helping out either the next or previous]
  4. People say there is no demand. There is no demand from the people who  say there is no demand, but just because you are a pension expert, doesn’t mean you know what demand is out there.
  5. People say that RM is a one off. Hopefully it is, hopefully we won’t see CDC as a replacement for good quality DB plans like USS and LGPS and all the unfunded Government schemes. But that doesn’t mean it can’t become the DC upgrade of choice for people who don’t want to be their own actuary, CIO and pensions CEO.

CDC is dead – long live CDC

In 2015, when pensions minister, Ros scrapped CDC legislation, effectively jamming the gun barrel before the silver bullet had been loaded. The CDC of Steve Webb’s Defined Ambition project had received high level legislative approval some months before but it was an ill-defined ambition which needed focus.

That focus came from Royal Mail and in particular from the work of Hilary Salt, Simon Eagle, John Millard , Terry Pullinger and the people who worked behind them (hat-tip to Derek Benstead). These people are now being treated as fifth columnists by many on social media (the usual suspects).

Meanwhile , half a million people a year reach retirement and have very little good resource to help them with their retirement decision making. Retirement Line is such resource but it is not a silver bullet for the mass market.

CDC is a mass market solution. It does not provide a tailored solution (as Ros wants) for everybody , but neither do DB scheme pensions or the State Pension for that matter.

If you want a tailored retirement solution go and get yourself a bespoke tailor – you’ll find them in the financial equivalent of Savile Row – they don’t come cheap.

If you want a non-tailored retirement solution, then support the development of CDC as a means for master trusts to provide scheme pensions to their savers and as a means for “decumulation only” schemes to provide scheme pensions to those who don’t have their retirement savings in master trusts (the self-employed and those who use SIPPs and personal pensions).

Healthy competition does not need to be snuffed out

Ros did for CDC (c1.0) and it may be she’ll turn on CDC (v.2.0) – though I doubt it!

CDC is a solution for those who won’t pay the high price of annuity guarantees or suffer the uncertainty of DC (SIPP) drawdown.

CDC is healthy competition for pensions wealth but the natural home for pension pots too large to cash out but too small for wealth management.

What is the point of snuffing out CDC as so many people in pensions (my missus among them) seem intent on doing?

I look forward to continuing the debate with both my AgeWage badge  and my First Actuarial hat proudly on my head!




About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to CDC – a silver wage not a silver bullet

  1. Brian G says:

    I agree that CDC is a potential choice. Provided that a way is found to clearly communicate what it is and what it isn’t then it could become a valuable addition to the small range of retirement options. The biggest challenge is to communicate that CDC is not offering a guaranteed income and yet still offers a lower level of volatility than individual DC alternatives. The option to transfer out before going into CDC retirement is an essential antidote to those members requiring freedom of choice.

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