August 1st – CDC day!

The 1st August is the day applications open for a new type of UK pension – what pension people know as CDC (though in regulation it is collective money purchase).

The party line from the DWP is about innovation and can be read here. The DWO – and especially the Pensions Minister , have been supporting innovation through CDC since March 2018 (read this blog for Guy Opperman’s early comments). But by setting the regulatory bar as high as TPR’s CDC code does,  the DWP has so far only offered a  niche service for Royal Mail , its actuaries and lawyers. The DWP acknowledges that it needs to widen the user-base, but it’s light on a marketing plan. For consumer driven innovation, the DWP should be looking more broadly, in particular it should be making CDC part of its “decumulation review”, due to launch a consultation soon.

I am more interested in the views of those who have a consumer focus, and look at CDC as potentially a “pensions boost for millions”.

Adrian Boulding is one such enthusiast, I am another. It’s not just Adrian and I , who are excited. The FT has firmly pinned its colours to the mast in supporting a collective way of spending on. as well as saving for, retirement.

Research conducted by the RSA from customers saving for retirement (July 2021)

Employers are not very enthusiastic

CDC currently looks like a work in progress

Retail or “contract based” CDC

So far, there has only been interest in running CDC as an employer sponsored scheme. But I see demand from consumers for a default investment pathway that is neither an annuity or a drawdown policy but something in-between.

Annuities without the guarantees” or “Drawdown which never runs out” (bottomless drawdown) are concepts yet to be properly explored by insurers or regulators.

It’s likely that retail – or contract based CDC will be delivered through a fund not a scheme.

Let’s hope that now CDC is “open”, we can get on with “opening” the concept to those not the Royal Mail delivers to!


About henry tapper

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