We make a clear distinction between legal duties and our expectations within the draft code by using the word ‘must’ when referencing legal duties, and ‘should’ and ‘expect’ for our expectations. We use ‘need’ where the process is necessary to allow a scheme to operate even though there is no expectation or legal requirement in place. – The Pensions Regulator’s consultation on a multi-employer CDC code.
We are in a world of legal niceties and the question that faces the Pension Regulator is whether it move on from their position on a single employer CDC code (it wrote for Royal Mail and probably nobody else) and consider a new kind of stakeholder. Suppose the multi-employer scheme’s employer is another Royal Mail then you rule out the 5.7m businesses in the UK who might employ people who could be in a CDC.
The biggest multi employment scheme in the UK is Nest with over 1m employers paying into a DC scheme. It uses the Relief at Source system for incentives, it isn’t necessarily tax relief as many employees don’t pay tax but get the incentive as if it were tax relief. But when I asked the DWP what the position of CDC would be on using relief at source (receipt of contributions from employer and HMRC) I was told that this had never been asked about.
My point is that between the master trust authorisation carried out by TPR and the Royal Mail CDC scheme carried out by TPR is the mass of employers who may want to use CDC rather than DC. The actuaries and lawyers who have dealt with the Royal Mail will have little to no experience of the employers who currently use GPPs or master trusts such as People’s and Nest and L&G (who have 2 separate master trusts, one working under Net Pay (for tax payers) and one under RAS (for those who don’t pay tax).
So to suppose that regulating what goes on in an UMES multi-employment CDC where any employer should be eligible and a single employer CDC (Royal Mail) would be a mistake.
I am sure that TPR know this, this is why the wording in the piece of writing at the top of this blog is so precise. That’s because the relationship between the proprietor , the trustees , the advisers , the employers and the members is going to be very varied and what is going to be required from TPR is what they have achieved so far at both ends of regulation.
CDC schemes will “need” to put members to the fore but they “need” to sustain themselves in business by using the latest technology to keep costs down and deliver VFM by was or pensions purchased and increases to those pensions. They must protect against bad terms but they cannot miss out on good ones. CDC schemes must behave as a scheme that’s expect to pay the last penny of pension but must have a contingency or “continuity” so that members get pensions paid by others if things go wrong. Some of this “must” be in place by DWP and parliament’s law and other things “should” be in place to meet TPR’s Code. Balancing expectation against what must happen and what trustees and proprietors say needs to happen is what regulation is about.
It will be a very difficult business dealing with the UMES schemes that come forward for authorisation than the Royal Mail or the Church of England (which has poked its head up with 700 employers in its scope for CDC).
There are workplace GPPs who feel they should be workplace CDC instead, there are massive employers who feel they should take back control of the pensions their staff get for their money (their being employer and employee contributions). An example of the operational differences between Aberdeen and Stagecoach is as great as Royal Mail and AgeWage! There will be CDC schemes that will work for some and not so well for others and what we need is a Regulator for whom “must”, “should” and “need to” are balanced.
I don’t see any point in replying to the consultation with a request that the Regulator pays attention to your specific needs nor attempt to understand the full range of needs that you can dream up, by way of employer and member needs. Instead, what will be needed is a system of principles that is flexible enough to allow CDCs to become a way of paying pensions to anyone who saves for one.
- Introduction
- What is a CDC scheme?
- Applying for authorisation
- The authorisation criteria
- Authorisation criteria: Sectionalisation
- Systems and processes: Overview
- Systems and processes: IT functionality and maintenance
- Systems and processes: Scheme governance
- Systems and processes: Processes
- Systems and processes: Member communications
- Scheme proprietor: Overview
- Scheme proprietor: Accounts
- Fitness and propriety: Who we will assess for fitness and propriety
- Fitness and propriety: How we assess fitness and propriety
- Fitness and propriety: Honesty, integrity and financial soundness
- Fitness and propriety: Assessment of competence and experience
- Fitness and propriety: Conduct of individuals involved with the scheme
- Financial sustainability: Overview
- Financial sustainability: Financial resources
- Financial sustainability: Other ways of meeting costs
- Financial sustainability: Employer support (single-employer CDC schemes only)
- Financial sustainability: Costs, assets and liquidity plan (CALP)
- Financial sustainability: Financial reserves and haircuts
- Financial sustainability: Business plan (multi-employer CDC schemes only)
- Continuity strategy: Overview
- Continuity strategy: Preparing for a triggering event
- Continuity strategy: Continuity option 1 (discharge liabilities and wind up)
- Continuity strategy: Continuity option 2 (resolving triggering event)
- Continuity strategy: Continuity option 3 (closing the scheme to new contributions and/or members)
- Promotion and marketing: Introduction
- Promotion and marketing: Clear and not misleading
- Promotion and marketing to employers: Systems and processes
- Promotion and marketing: Rectification
- Sound scheme design: Introduction
- Sound scheme design: Viability report
- Sound scheme design: Investment
- Sound scheme design: Viability certificate
- Supervision: Introduction and significant events
- Supervision: Triggering events and implementation strategy
