The FT’ Mary McDougall gives us a scoop 

In a consultation launched on Tuesday, the government is proposing to broaden access to CDC pensions to allow multiple employers to participate in a single scheme.

If this is so, the consultation will be launched later this Tuesday and the world waits with baited breath to learn how this consultation will differ from the last consultation on CDC multi-employer schemes published 30th January 2023.

Even by the DWP’s glacial pace, moving at a consultation every two years is not the mark of a department in a hurry!

It has taken 6 years to get Royal Mail’s CDC scheme over the line and there was much celebration in Farringdon that their Collective Pension  scheme launched yesterday.

The Royal Mail pension scheme was created by a committed employer and employee representative (CWU). It will take equally committed organisations to make multi-employer CDC work. I hope it does, for the Church of England , for TPT and for other multi-employer schemes looking to reinvent themselves as CDC.

It is a damned hard thing to do, ask Royal Mail. It is expensive to establish and it has to be based on a business case founded in demand from employees and employers to participate.

It needs capital backing at outset, the owner of the scheme – whether an umbrella employer or a commercial funder and it needs patience.

All of these things should be available to those in pensions. But I wonder if this further consultation will open the door for this important innovation?

I am on record – on this blog – for supporting the concept of CDC. I recognise for CDC to work best, it needs to be ambitious – to be whole of life and it needs the young to trust the old not to take all the money and leave them with the crumbs.

If CDC is restricted to one cohort (decumulation only) then it risks reputational problems because of volatility of income, problems that could discredit it (as happened in the Netherlands).

I could (and won’t) go on. The main issue for CDC is that there remains no commercial model that commands the appetite of the backers of these things, the banks and the secondary bankers who manage private equity.

CDC will be a mutual model and while mutuals have succeeded running DC plans, they have found it hard running pension schemes. Almost all the multi-employer DB plans have run into problems over time , mainly because of deficits that emerge in scheme funding from time to time.

CDC should be able to manage deficits differently, through smoothing and through the patience of regulators allowing time to heal short term injury created by market turbulence.

The success of CDC will , to a large degree , be down to getting the tricky balance between defined ambition and member protection right. CDC does not (yet) have the safety net of the PPF beneath it. It is operating under the rules of DC which say that risks are with the member not the sponsor nor the PPF.

While the pension freedoms enabled (and have required) individuals to take all the pension risk, the risk transfer has been into a different regulatory landscape, into the retail world of SIPPs and SIPP drawdown. For those who do not have a SIPP it is bank account and bank account drawdown. It is a profoundly dodgy risk transfer for most savers, one that by our own admission, we are singularly ill-equipped to deal with.

CDC takes away the risks of us living too long and running out of money. It gives savers a consistent wage for life and it is what 80% of us want. But it will need a backer and unless the Government decides to be that backer, I don’t see CDC getting scheme backers – unless perhaps they are the Church of England and TPT.

I do not see the commercial master trusts (other than TPT) showing much appetite and they include the mutuals such as People’s Pension that really should be at the fore.

So nearly two years on from the last consultation on multi-employer CDC, we have another. We will see how close we are to having a regulatory model that works for commercial entities and to what extent the Government is relying on the new mutualism of the RSA and the friends of CDC.

Whatever the solution the DWP comes up with today, it is bound to be controversial. The question is whether it will lead to more people getting wage for life pensions that offer  dignity in retirement. If this consultation can – I welcome it, if it can’t – it suggests that innovation will need to come from elsewhere.