Why is no-one declaring for CDC?

It is getting on for 6 years since Royal Mail and CWU decided to quit warring over pensions and settle on a CDC solution for their staff. To date, not one penny has been committed to its corporate pension plan and not one other CDC deal has been approved by the Pensions Regulator.

The Government has moved from being reluctant facilitator to committed promoter in that time. Yet – despite all the noisey seminars, webinars and CDC sessions at conference, not one employer, master trust, union or federation has stuck its hand up and said “we want to do this thing”


I asked that question at a colloquy of actuaries at a CDC session we were hosting yesterday. The DWP said that if they hadn’t had employers coming to them expressing interest, they would have given up years ago. An actuarial consultant said there was interest but employers didn’t want to scare staff by coming out.

Coming out is the right phrase. Right now , wanting to do a CDC schemes about as career threatening as declaring yourself gay in the 1990s. So candidates sit on their hands.


The answer is that despite all the academic papers , the actuarial modelling, the legal opinion, people just don’t believe that CDC can deliver more than annuities or drawdown.

When I say “believe”, I mean have the courage of their convictions so that they can survive being put in the metaphorical stocks of social media and have tomatoes thrown at you.

The full benefits of CDC are 20 years away, when people are still drawing better pensions with the prospect of payments to come till the day they die.

The immediate grief for declaring for CDC right now, is clear. You will get no peace and you will have employees frightened by pension extremists for whom only a guarantee will  do.

Anything for a quiet life?

Nobody should be required to be in a CDC, there should always be an opt-out so long as the money needed to fund the CDC is “our money”.  But the alternative to a CDC has to be an opt-in, if CDC is to ever get to scale.

There is no use pretending that a CDC arrangement can be another investment pathway. Here are the numbers for investment pathway take up published by Vanguard to the end of last year, Vanguard have over 400,000 UK customers.

Those who think that you can set up an investment pathway called CDC and expect it to get to scale are either living in cuckoo-land or have a death-wish for CDC.

CDC requires commitment and conviction

CDC is happening at Royal Mail because Terry Pullinger on the CWU’s side and Jon Millard on Royal Mail’s side , took advice and declared their organisations were going to do CDC.  I applaud them for it. It is not of their doing that the deal is tied up in knots.

CDC is not happening everywhere else because there is zero appetite among potential sponsors or providers of service to put their hands up publicly and say “if you legislate and  regulate, we will come”.

And CDC is now so owned by actuaries and lawyers that those who aren’t in the magic circle are excluded.

For CDC to work, the conviction must be that the fundamentals of the collective pension apply, that economies of scale can be created, that pooling can solve the nastiest hardest problem in finance and that the infinite time horizon of an open pension scheme can allow a scheme to invest in productive assets.

The upshot of all those beliefs has to be that over time, CDC will deliver markedly better pensions than can be purchased from an annuity broker or from the drawdown from an individual pot.

If we believe that, then that conviction must be actionable. There must be people prepared to set up CDC schemes in the belief that if you build them , employers and their savers – will come.

Regulatory easement

Right now, what the DWP and TPR are legislating and regulating for the  “earthquake, wind and fire” . They’ve lost the “still small voice of calm“, the reasoned response to the furious clamour.

So they have created barriers to setting up a CDC scheme that make it all but impossible for those who get it – to do it.

It is time to accept that the first version of TPR’s CDC code and the legislation behind it are simply not fit for any purpose other than Royal Mail’s.

Instead of legislating and regulating for failure, we need a framework that encourages success and makes CDC not just something that can be done, but something that organisations feel proud of doing.

CDC needs more than actuaries and lawyers

I am a fellow of the Royal Society of the Arts but I am not on the RSA working group on CDC. To be on that you need actuarial or legal qualifications and/or a fair amount of money to be bay the subs. It is in effect a closed shop.

The popular clamour of CDC doesn’t exist. After 6 years it is something that still can barely speak its name , it has no Pride.

And for that reason, millions of ordinary people are going to find themselves reaching retirement with no default option which turns their pot to pension.

We might think that the freedom to do with the pot, as we like, is an advantage, and to those of us who have full financial self-confidence – it is. But once we’ve explored freedom, many of us will return to the premise that our pot is there to buy a wage for life.

And for the vast majority of people for whom pensions are hard, frustrating and ultimately unmanageable, we offer nothing but pathways that don’t meet our needs.

The actuaries and lawyers argue about structure and safe-guarding but miss the bigger picture. We must have pride in CDC and get on with it.

My Message to Laura

CDC is needed now- not in 10 years time, Laura Trott is committed to a further consultation on CDC for master trusts and for individuals who want to turn pots to pension. In July she wrote

“The government is committed to exploring development and the new regime to regulate new types of CDC for multiple employers, and decumulation.

“It’s important that we set CDC up in the right way, and we want to take the time to get it right.”

In the meantime, we must find ways to accelerate this process and to build products that can achieve the aims of CDC, without waiting for a process that has already taken too long, and looks like taking a lot of time yet.

We may need “CDC friendly” solutions and an intent to work towards whatever the DWP and TPR finally come up with. We need employers and providers who declare their intent and wishes. CDC cannot be the pension that dare not speak its name.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Why is no-one declaring for CDC?

  1. Derek Benstead says:

    Starting a DB scheme is very easy. Get a lawyer to write a deed and register with HMRC, there are no TPR authorisation tests to pass. (It’s so easy, it’s why scam DB schemes exist.) If starting CDC were as easy as starting DB, I have a client which would have started CDC by now. As it is, getting a CDC scheme through TPR authorisation is a mammoth and off putting task, which only the largest of employers might contemplate. And even then, only if they want a CDC scheme which looks like Royal Mail’s. So my client is waiting for multi-employer CDC in order that the burden of start up can be shared, provided that a group of like minded employers can be got together, and provided that CDC regs are amended to permit the kind of CDC design which unconnected employers can share. It’s no surprise that CDC scheme no. 2 hasn’t approached TPR for authorisation, we’re some way off that happening. DB regulation was built over decades, it’s no surprise that the regulation of a wholly new to the UK kind of scheme takes time to develop. Legislation is written by legal experts, not by people expert in the topic being legislated on. Just because people like me make submissions to consultations on legislation, does not mean we get listened to immediately. The CDC legislation is imperfect and needs some wrinkles ironed out.

    • henry tapper says:

      Normally, with such enterprises, you start simple and work towards the complex. With CDC – it’s the other way round. No CDC scheme will present more challenges than RM nor require more complex legislation. In effect it has created an obstacle for every other user case and it would almost have been better if it had been given its own statute so we could have got on with helping clients like yours and people who need pensions and just have pots.

      It’s no use blaming the DWP or TPR fpr doing the job properly, but we should now be looking for ways round RM so that people can have better pensions than can be afforded from an annuity and more peace of mind than comes from drawdown.

      I will continue to explore alternative solutions to the RM CDC model and take them to the avuncular Julian Barker for his consideration!

      With respect to your clients, the mass market problem here is the retail pot to pension problem – I don’t see that as a TPR but FCA issue. Multi-employer CDC schemes fall into the niche of the DB master trust. We are promised a consultaiton in the autumn. Maybe we will have legislation within this parliamentary term. But ordinary people deserve better choices than the investment pathways and “freedom from the pension freedoms”! Let’s catch up on this as nobody thinks clearer or speaks better on these things than you!

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