Several people have asked me why I have been promoting “guaranteed” pensions with Edi Truell rather than promoting CDC pension (that have no guarantees).

There is a simple answer to this and that is that I want to get things done.

CDC has been criticised for many things but one thing it has not been criticised for is for making people money. It hasn’t made people money, in fact it has soaked up a huge amount of time and produced – to date – no CDC pensions.

The main reason for this is that there is no commercial imperative for a DC or DB scheme to switch to CDC and no commercial imperative for a pension company to set one up. Indeed, if I were to ask most of the CDC pension scheme would make money to its funder, they would almost certainty look blankly at me and ask what I mean by “funder”.

Pension schemes, whether DB, DC or CDC cost money. They need trustees, administrators, member portals , people to manage the money and people to manage the distributions or claims on the money. All of these people can make separate claims to get paid but there has to be someone who has the business plan whose job it is to set the scheme up and finance it until a profit can be extracted to repay expenses and provide the funder with a return on investment.

In short , CDC needs a credible business plan and a justification for its existence. To date, only Royal Mail has created such a plan and justified its existence. Even Royal Mail has yet to get its CDC scheme over the line.

There is insufficient clarity as to what a commercial model for a CDC plan should look like and this is – I fear -because CDC has been developed in a hot-house of social reform (the Royal Society of the Arts) and not in the harsher environment of primary and secondary banking. There are no CDC schemes because there are no funders, there are no funders because there is no capital behind CDC. There is no capital behind CDC because there is no credible business plan.

CDC is the precious child who is still getting home schooling while all the other children are kicking seven bells out of each other in the play-yard.

The superfunds, which could quite easily have been CDC superfunds, have instead adopted existing models – defined benefit occupational pension schemes. Where they have been unable to progress, they have morphed to provide capital backed journey plans of the pension super have, which turns DC pots to DB pensions.

This is because the capital backed model, as opposed to the mutual, can be brought to market with a business plan that is explicable and sustainable. Guaranteed pensions don’t pay out as much as CDC pensions over time, but they pay out more than annuities and they do what drawdown doesn’t do. They are fit for purpose for today’s market (not tomorrow’s),

CDC has no explicable business plan and so it is considered unsustainable. The CDC code and regulations from TPR and DWP respectively, spends more time considering CDC’s failure than its success. Since it is neither DB or DC – it has to operate on a standalone basis. without the PPF to bail it out but with the actuarial assumptions over longevity, fund returns and inflation that DC avoids.

In short , it is isolated from the twin anchors of past provision and is drifting. The conversations it has are about protecting members, but it has no members to protect.

It is not easily comparable with any existing pension and therefore very hard to explain and even harder to sell. Though I still believe a CDC pension is a better pension, I can find no one to sell me one.

In time CDC will move to a commercial footing

There is demand for pensions, as opposed to insured annuities. People know the difference is in “value” and they are as happy receiving a pension from a pension scheme as an annuity from an insurer. If the pension gives them a lifetime income in excess of an annuity, they will choose the pension – providing they are happy it will be paid with reasonable certainty.

I am quite sure that in time, once scheme pensions have re-established themselves as an alternative way of turning a pot to a lifetime income, CDC set out to show scheme pension guarantees are neither essential, nor (for many) desirable. I am sure that in time, those selling modern tontines (the only credible business model yet to emerge) will carve a market for themselves under the CDC brand.

But that looks like being several years away and for those with entrepreneurial aspirations and more than a decade waiting for “something to come along”, several years is too long a wait.

So I have changed my stance, I still support the CDC concept and believe its time will come. But in all the messing around since Royal Mail took its decision, CDC has lost its window. It is now stuck with overly prescriptive regulation but no model by which capitalists can extract their capital.