CDC – a personal perspective


Yesterday I published a very passionate denouncement of the ABI which unsurprisingly hasn’t pleased the ABI. My beef is based on 15 years of frustration getting to a point where Government has promoted CDC as a Mansion House Reform and the ABI is turning its nose up, as they did with auto-enrolment, and pension consolidators.

My frustration is for me and for people like me.

Rob Yuille, who on a personal basis, I’d happily have a few drinks with, has responded publicly

Henry, we hope the research contributes to policy development on CDC. It’s not about smearing or gunning for it – polarising the debate into camps doesn’t help anyone. It’s about working through the issues, many of which we’d agree on, which is why we will continue contributing to the thinking by RSA & others. The point is, the waters *are* muddy, because outcomes vary, policy allows for choice, the choices are complex and this necessitates tailored help. For avoidance of doubt for your readers, as I said to you yesterday, we didn’t criticise the previous research or question the integrity of its authors, or say it was exaggerated. We also avoided hand-picking charts from the research to tell one side of the story, and would suggest you do too!
Full research here:

I am guilty of hand-picking charts (BTW) but be thankful for that – my “blog” is 2500 words long as it is! Including all the charts in the MBW would even stress the bandwidth of WordPress.

Rob’s right, the ABI don’t directly criticise, they work with partners, commission research and seek to influence the debate using data.  None of this is in itself bad, were the debate designed to lead to how CDC might work. But the ABI seems determined for CDC not to work.

Claire Altmann, who works for Standard Life, told the PLSA at its June investment conference that to get to scale, CDC would need to be the natural means for savers to convert their pot to pension. The ABI and constituent members such as Aegon have made it cleat that CDC should not be promoted as the natural option (ok default) way for savers to turn pot to pensions.

We can only conclude that the ABI do not want CDC to get to scale but to serve the kind of purpose of a self-select fund of a workplace pension (nice to have but never used and jettisoned after a decent interval). A similar “planned failure” could be created by partnering a DC scheme with a CDC scheme elsewhere. It doesn’t really matter what kind ot arrangement is place, DC economics says that unless the default pathway takes you to CDC, CDC isn’t going to happen. In ABI’s world, CDC is as likely to happen as superfunds which have been throttled by a Gateway that admits no customers.

But to the personal perspective

I am 61 and three quarters, I have my savings with an insurer in a workplace pension and I want a pension that isn’t called “annuity”.

For the past 40 years I have saved into funds and seen my pot rise and fall in value. In 2022 it went down £100,000, giving back a lot of gains made last decade but heh – we learn to live with risk.

But I , and millions like me, are being told to be aware that CDC may not be “magic beans”, may not deliver 30-70% better outcomes than an annuity and may deliver a pension that goes up and down in line with the markets.

Yes – I am aware of these things. I have lived with this uncertainty for the past 40 years and am prepared to live with it going forward too!

Maybe , my expectations going forward is for a pit of tarmac rather than the rutted track I’ve trodden, but I don’t want a red carpet!

I know I am not alone. I witness people putting value at risk when they buy a scratchcard, hand a tenner to a bookie or play online slots. I have seen the fleeting disappointment, the occasional ecstasy and the way we absorb the twin imposters into our BAU.

This is not my pension strategy, nor those I meet in bookies and on racetracks, but I understand how we deal with risk, because I take it and live with the consequences.

I will get a full state pension and I intend to work hard till I find no reason to continue. I would like to convert some or all of my pot to CDC pension. I live with risks and want to have my pension invested. I know that others are not like me, but many are,

My message to Rob and the ABI is to just let me get on with it. My message to Government is “I’m tired with “ultimately”

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 CDC – a personal perspective

  1. Eugen N says:

    Henry, with real index linked gilts of 1.2% per annum, the chance for a CDC pension to beat a pension annuity has decreased dramatically.

    People who are risk adverse are buying pension annuities again. The rest, have other plans, to use the small DC funds to bridge themselves to age 67, pay debts and mortgage before retiring etc, and live mostly on State pension. Entering in retirement in a CDC pension would be a one off transaction, which no independent financial advisor will sanction, having has experiences with with-profits annuities, the last ones sold by Prudential up to 2015. They performed poorer than purchasing pension annuities.

    Just check the number of people accessing pension funds before retirement (usually age 65), it is huge. They do it to help kids with wedding cost or getting on a property ladder, buy a nice holiday, replace the car, get a new kitchen or a conservatory, I have seen them all.

    That is the tragic truth.

  2. guy rawson says:

    Most people with DC contribution schemes I think will take a fexible draw down approach, this leaves their money invested and at risk of sharp downturns in the market. Although some will go for an annuity for the secure income they provide it may depend on how long they think they will live, the payment offered and the years for them to be seen to be “winning”.
    With interest rates as they are, if you could take the DC pot and move it into a bank account offering 5% p.a. and the security of the funds I wonder how many would take that choice?
    It is strange that we invest the funds over 40 years via the stock market in order to grow the pot, but we have to maintain the risk of losses unless we go for an annuity.

    I have carried out many drawdown scenarios on my pot, looking at different growth rates and the drawdown levels to see when the money might run out. I plan on the majority of my estate to my beneficiaries being via my property not my pension pot. Often I see projections where the capital sum is largely untouched until the person is in their late 80’s and yet typical average age projection is showing 85-86. Of course one gain in leaving the pot largely untouched is the investment company gains more in management fees etc.

    It is strange that we are so many years down the road of supposed freedoms regarding our personal/work DC schemes yet our choices are relatively limited

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