Minister for pensions Torsten Bell says:
“Too often people approaching retirement are left navigating complex choices and shoulder risks they shouldn’t have to face alone. By expanding CDC to more employers and consulting on retirement CDC, we are helping build a fairer pensions system that gives people confidence their hard-earned savings will last, and they can enjoy their retirement.”
Gill Wadsworth, an old style journalist I grew up with, is given the job of telling Corporate Advisers what is happening. I suspect they know but don’t believe it’s happening.
Here is Gillian talking with an adviser, for whom CDC appears to start not end with “Retirement CDC“.
Since the government is only looking to occupational schemes to offer retirement-only CDC, the significant scale and operational demands mean they will largely be the preserve of master trusts.
However, given the potential operational and administrative complexities of offering retirement CDC, even the master trusts are a way off demonstrating their capabilities in this area.
Mark Futcher, partner and head of DC pensions at Barnett Waddingham, says: “Operational readiness also matters. Administration and governance frameworks for CDC are still developing and will require investment and bespoke solutions.
Before widespread adoption, the industry needs to ensure those systems are robust and scalable.”
That’s true, that’s why the timeline for CDC is so long. Royal Mail began its discussions in 2017, 8 years ago. Here is the timeline going forward. Here is the Roadmap for CDC and you will note we have four years before we see Retirement CDC (the one that offers DC savers – not CDC savers- their chance of enhancement in their pensions).
All the action for Retirement CDC schemes happens in 2028 with the DWP sensibly curtailing the chart so as not to time the launch of conversions of pots from DC schemes till another application has been approved by “prospective” Retirement CDC schemes.
And here is the Corporate Adviser contingent moaning that they can’t get on with planning until they have more from TPR by way of guidance
“It is only with visibility of the entire regulatory regime that any prospective provider can judge whether they can introduce scalable CDC schemes to the masses – and in a way that is commercially viable.”
What is this latest whinge about? You can pick your expert from the usual suspects, here is the latest whinge.
“We are still awaiting a consultation from TPR on its extended CDC Code. This includes the potential need for TPR to approve this activity retrospectively – and may make it challenging for prospective providers to share anything of substance with trustees of DC schemes as part of the development phase. Given any authorisation application to TPR will need to have regard to a prospective provider’s expectations to build scale through commitment from DC schemes, it could be difficult to overcome the ‘chicken and egg’ dilemma here,” he says,
I had a conversation with TPR who tell me that the Code will be with us by Christmas. A Christmas present that most of the advisory community will find reasons to complain about because they like the idea of better pensions but hate the idea of doing the work to make them happen.
There is of course a good reason for that. While we moan about not getting enough by way of mandatory contributions (using auto-enrolment) we are happy to complain about getting an enhancement to CDC which the actuaries and the Government assess as improving pensions by up to 60%.
That question is my question mark. Are those who manage our DC plans, our commercial plans – the ones we call master trusts, going to stop whingeing and use the very generous development plans offered them, to get on with it.
Or are they going to find more reasons to sit in DC and hope that CDC isn’t going to happen?
My advice to Corporate Advisers is that there are a lot of people outside the tent who are getting on talking with DWP and TPR and getting the finance together to put CDC together, not waiting till 2029 but using 2026 to test whole of life plans which can be launched at the end of next year.
But oh does this look a threat to the Corporate Advisers!
Mark Futcher (Barnett Waddingham) notes:
“It will be important to ensure that CDC does not inadvertently draw resource and regulatory focus away from further enhancing DC, which remains the system most savers rely on. CDC should complement, not crowd out, continued improvement in existing provision.”
Whether retirement CDC delivers a silver bullet in terms of better outcomes for members will only become clear once schemes are in place, suggesting much is resting on this consultation.
Critchley (Aviva) says:
“The success of retirement-only CDC will depend on the attractiveness of the initial income, especially when compared to annuities, and how successfully schemes deliver on their promises.”
Here is the backlash against the obvious enthusiasm people have for decent pensions;- not indecent annuities or mysterious pots.
The attraction of annuities and drawdown to those who advise on and manage our retirement savers is only too obvious. You can watch it at DC award ceremonies, where the industry congratulates itself for earning so much money for itself.
We do not have to wait till 2029 to watch CDC succeed. We can get started today!
