These people start with a banner headline, in which is the impossibility of “collective choice”.

Collective Pensions with Investment Choice: Making CDC work for the UK

This is an 84 page monster from PPI employing the time of an army of researchers to conclude that you could do better than CDC if everyone had a tailored drawdown policy with an umbrella of mortality pooling , cheaper than individual annuitisation. This has been discussed before and discarded because pensions need to be done and not just modelled. Now is not a good time for further blue sky thinking, this is not what the Pension Commission should be spending weeks over, we need to get on with completing what has been left undone. There is only one CDC plan after 8 years, one superfund after 8 years, no dashboard and no way forward for the 45% of adults who don’t have a workplace pension.

So I read this with disappointment from the paper’s Executive summary. This paper takes 8 pages to get to the Executive Summary where it makes this statement.

At the heart of the paper’s argument is that we are all different and all need to have pension plans bespoke to our needs. I can see that people may opt-out of a single plan from religious, ethical or because you or your advisor want to manage wealth as you see best. But to start with a view that we all want our own way forward has been disproved. Nest has over 14m accounts and only 2-3% use the options available beyond the default. Collective Drawdown is an assertion that people or their bosses can choose funds to meet their needs- that’s the perspective taken in this mammoth report

From this perspective, it is unsurprising that collective drawdown can outperform them. Indeed, in any scheme design that provides no opportunity to take account of different members’ risk preferences, the result must inevitably be
suboptimal.

from there we come to the conclusion that

“Collective funds can benefit members by sharing longevity risk, but not investment risk

The ambition of existing CDC designs that motivates pooling members assets is to share investment risks across generations. In the collective-drawdown design, some generations will be lucky, and their assets will grow more than those of unlucky
generations.

The hope in other collective pension designs is that they might be able to improve outcomes by risk-sharing between lucky and unlucky generations.

The central result of the mathematical research underpinning this report states, in essence, that it is impossible to improve all member outcomes by sharing investment risk in this way.

This is an abstract theoretical result but is borne out by quantitative results which confirms that the CDC designs which attempt this form of investment pooling lead to appreciably worse outcomes for members”

I am sorry but the vast majority of British people are prepared to take a pension that is appreciably better than freedom from pensions and while collective drawdown looks lovely, it is not going to work for the 97% of people who don’t take the decisions it needs to work.

So I disagree with the analysis in the 84 pages and the conclusions made by this article that we should redesign what we have just embarked on after so many years of bickering – that is CDC for everyone!

Press report

‘Collective drawdown’ could deliver better retirement outcomes: PPI

Behind all this is a conclusion from the PPI, Kings ,Nuffield and assorted thinkers that collective solutions don’t work – except in death. This way leads to an assumption that the state pension doesn’t work because it relies on social insurance.

It assumes that there will only be one group who will benefit from starting early and finishing late. It assumes that CDC is a kind of tontine and not a steady  pension system that works on the continuity principles of the state pension. A pension  that  won’t stop.

This is  a third recommendation to derail CDC and start again with a policy initiative which could leave us in the next decade or the next decade but one before we made progress. This kind of thinking is fine for those who want specialist wealth management – the 20% of the workforce who employ advisers who may want a more efficient way of managing their wealth than a SIPP or insurance than an annuity. It may be nice for the rich people who do not want to associate with those in a collective pension plan.

The three recommendations of this report are irresponsible, mis-timed and result in a massive waste of people’s time and research money.

Bobby Riddaway’s comment on Linked in has caught my attention – his view is my view

I’ve been arguing for industry solutions to Sustainability (previously esg) for 10 years as small/ medium can help the transition but should not be driving it. Spent the last 3 years persuading policy makers that small and medium scheme solutions needed as they will not be consolidated away.

You may think I’ve gone off point. But no. My main point is those at the top of the chain seem to view pensions as all singing all dancing fully funded and resourced schemes and this report seems to think pensioners have a fully funded pot and the time and expertise to choose between options and plan their retirement. The vast majority of uk workers will go nowhere near this.

They need solutions designed for them. And as you say Nest has proved that point. And as you also say we have finally come to a solution that experts are broadly in agreement with, subject to certain design features. So lets not make this even more complicated. There is no way individual draw down schemes will ever work the main population. Its like comparing what features you want on your Bentley.

Press release (on which the report above is based)

Report (you can download here)