Torsten Bell at the CDC soft launch yesterday

Something very strange happened at yesterday’s soft launch of the multi-employer CDC scheme. I was allowed to ask a question.

My question was

If I fancy some of this “better pension” for myself, is there any way I can choose to build and  be paid a CDC pension?

The oddness was that I wasn’t and could see I wasn’t a chosen questioner and my arm was not going to be recognised. The questions that had come before had been all the usual sources including Just – a provider of annuities.

Then, just as I was expecting to be ignored – as happens in these stage managed events – Torsten Bell interrupted the end of the affair and pointed to me

“That fellow has a question, his arm has been getting sore being stuck in the air..”

I asked my question, on behalf of everyone who is fed up with CDC being owned by a small number of consultants and lawyers and civil servants and being secretly denigrated by ABI and the insurers for whom the expensive certainty of annuities is the only way to get paid a retirement income for life.

I felt in the moment that Torsten Bell treated me as asking a genuine question and not being a menace, that there might be a way for a CDC scheme to offer small employers and one day even the self-employed and retired, a chance to swap “freedom” for the security of a pension, we could buy in exchange for a pot.

Of course everyone is considering multi-employer as the next tier down from Royal Mail. There were in Aon’s beautiful room several such employers, I was pleased to see Nestle, First Bus, Kingfisher, Harrods- some of these were there at my suggestion. But they were not asking any questions – they hadn’t been given the chance. Where were the smaller employers, where was its federation – where were there workplace pensions? So far only large employers to be admitted to the discussion?

CDC will come alive when not just these large employers but the smaller ones lift up their hands and ask what I asked – “can I have some of that“.

It is hard to see why it took the DWP so long to come up with this legislation. On the face of it, CDC is a pension scheme paid without guarantees dependent on the timing and incidence of contributions for each member. In terms of contributions, it will be exactly like any other workplace pension and (as I have written before) it should not be any more for an employer than participating in a master trust – even a GPP.

In terms of promise, that is determined by converting contributions into pension using a formula designed by each scheme but based on each provider’s view of their costs, their investment expectations and their view of how long members will live. Ok there is a lot to think about around the edges – spouses, inflation, individual health expectations – all can be built into the conversion rate but the fundamental factor that matters in determining the rate of pension granted is the age of the contributor when they make the payment.

So my question was and is, can we pay people a CDC payment based on them and not on there being part of a workforce that makes a substantial pension scheme. Is a CDC scheme, when going to the Regulator for authorisation , going to be able to do so with a model that includes great and small employers?

Will there be an opportunity for the likes of me , closer to retirement than setting out, to join a CDC for the tail end of my career? Can I bring to the party the money that I’ve saved and get paid a pension on it?

We will know this later on today when the DWP’s legislation is read in parliament (or more likely this morning when it is published on the DWP’s website). Then I will get a proper answer to my question, but I know that question stuck in Torsten Bell’s mind because he kept looking at me as the event was winding up , with that look I’ve known before.

CDC is not about employers – other than it improves the pension as an employee benefit. It is about individuals getting a better pension. It is not about things like tax-free sums, or inheritance tax and all that stuff which so obsesses people. That may change in November, it may not. What I am in and those in that room yesterday, should be interested is pensions. If we are in an era where we believe that everyone should have the same opportunity to get paid a better pension , then everyone, eventually, should be able to swap to CDC, not just for what they are going to save but what they have save.

That is the measure of the inclusion of the forthcoming legislation for CDC. If it is inclusive, it will have been worth the wait. If it is just another to make the whole venture so low-risk that nothing can ever go wrong, it will exclude as many people as can benefit. I fear that we are still in the low-risk world that has dominated DWP and TPR for the past 20 years, which is why my question will be like a little Tsunami beacon floating on the sea, reminding everyone that nothing is changing but that the pressure under the sea is mounting.