CDC – the debate that should be had

This afternoon Arun Muraladathirm Stefan Lundbergh, Simon Eagle and I are having a debate on the best way to provide income in return for people’s retirement savings.

We’re going to have the debate on Zoom between each other and if we think it provides fresh insights into this topic, we’ll share the recording. We might even send it to the DWP who’s consultation on this question ends tomorrow (5th September).

Let me try to characterise the positions of the four of us

Arun’s is the easiest to define as it has resulted in a financial product “the SELFie” a bond you purchase with your savings that gives you income for a fixed period (say for the first 15 years of your retirement). Arun thinks for those with small pots, little appetite for risk and a yearning for certainty in what they’re buying,  a Government has a central role to play. He can now prove this through the popularity of the first issuance of SELFies in Brazil.

Stefan is harder to pin down. He likes to juggle with various ideas from around the world looking at solutions in Canada, USA, Australia and indeed Brazil. He focusses on the USP of each and tries to find what makes them work. I don’t think that Stefan is wedded to any solution , he is interested in what is right at a local level.

I am coming at this from a selfish point of view, I’m 61 and want to swap my pot for pension but I don’t want to go down the drawdown or annuity route till I am satisfied I can’t get the best of both world in what I increasingly think of as a non-guaranteed pension. I’m the enthusiastic amateur looking like Piers Plowman, to some solution that can come out of the graft of the “field of folk”. I’m the “old grey” – I have my “whistle test”, does the tune on offer make sense at a personal level

Simon, like Arun , has a product in mind. He is Mr CDC, someone who has – through working for half a decade on the Royal Mail solution, had to solve problems around fairness to all in the most ambitious of projects. He wants to use his experience to help with the much less ambitious (though no less daunting) a task, of turning a corporate solution into a mass market way to turn pot to pension. He is happy to call this product “decumulation only CDC”.

What we are debating.

Arun’s big question is “can a national solution , endorsed by Government can involve ordinary people taking market risk with their savings?”.

Stefan is asking  the question about choice architecture “should the decision be left to individuals to choose or whether it should be imposed upon us as a “strong default”?

I am asking how can you explain the mechanics of what is going on in such a way as to get public buy in; now and in the future? How can you achieve and maintain scale?

Simon is thinking about the feasibility of building and maintaining a solution. How can a pot to pension solution best be built?

Why do it this way?

Firstly, from our personal points of view, we value each other’s opinions and hope to improve our understanding of how to go about things through knocking heads together.

Secondly, we reserve the right not to publish and to use what is said between us as a Chatham House discussion (we quote what was said but not who said it). While I don’t normally like Chatham House, I think there is an opportunity here to say what we like without the certainty of it being reported (all four of us will have a veto on publishing)

Thirdly, sometimes external chat can distract from the focus. We have our agenda and we want to keep to it.

But if all goes well, and we feel that we would be happy for publication, we will – subject to us getting the technology right!

New ways to bring people together

The four of us are going to come together on a web call from Sweden , USA and the UK. We may be using laptops, tablets or phones and we may be on holiday or at work.

The new technology renders distinctions of geography, technology and of labour redundant.

We came to an agreement to meet out of recognition of disagreement, that we did not fully understand each other’s positions and were keen to find synthesis from what seem quite fundamental divisions in thinking.

At the other end of the debating prism are the discussions of the Work and Pensions Committee. They are of course more formal and of much greater note. The next one is coming up on Wednesday

Debate is crucial to getting things done. We need to get the tough choices people have to take with their retirement money taken. Right now, many of us are baffled , not by the choice, but with how to take it.

Let’s hope as we come back to work after the quiet August, we can bring the energy of my colleagues to our work and use the months ahead – not just to talk – but to get on with getting solutions to these tough problems – in place.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions. Bookmark the permalink.

Leave a Reply