With a CDC pension – you’re no target for support

I and a wide group of colleagues are considering becoming the proprietor of a CDC pension scheme that we make available to employers who agree with the Government that going collective could increase the pension paid to their staff after they retire by up to 60%.

I consider that this is rather take it or leave it. If you take it as right for your staff you will swap from a workplace DC pension scheme and if you don’t or aren’t sure, you will wait till you are clear what’s best.

If you are an employee, you won’t have much choice, you will either have a DC pension savings plan or a CDC pension plan and you won’t have much choice (I can’t see employers running both).

My career has been split between 20 odd years as a regulated adviser and the same again working with employers and trustees but not being seen to advise in a regulated way.

But now we have a new world where individuals who are considering their pension planning can get targeted support and I’ve been most taken by the opportunity this gives advisers to talk in a new way while giving advice. I am so interested I decided to speak to the Innovation Support team at the Pensions Regulator who are supporting me and my friends as we get ready to getting out CDC scheme authorised.

So I put these questions to my legal support

“We will want to offer Targeted Support to many members and eventually manage a segregated fund, as proprietor.

We are considering, once we have the name agreed and the company in instance, whether the proprietor’s company should be authorised by the FCA.

Can you confirm that you consider the proprietor being authorised by the FCA from outset helpful or necessary?”

This was my question and what follows was the answer

“we’re not setting any expectation that a proprietor should be FCA regulated (although it is obviously for you to ensure that any required authorisations are obtained) and we don’t necessarily rely on or take into account regulation by other regulators, although I would note that if the proprietor is FCA regulated, there may be more disclosure needed in your submission to us to explain the position”.

My take is that while Targeted Support can be offered to people considering their pension as a whole (DC pots, DB pensions, State – the lot), the job of the owner or proprietor of a CDC plan is not to provide Targeted Support let alone full advice to the people in the CDC plan.

This has come as something of a relief. If what CDC pays (pension that goes up with inflation) needed support or advice, then I suspect there would have been a complexity that had crept into the concept.

This may be where the 20 years advising adviser takes issue with the non-advisory consultant I’ve been since I was 45. As I get older, I find that taking choices is getting harder and therefore the phrase “you’ll have to take advice on that” is becoming more painful to me! My younger advisory self would have been shocked that I’d done him out of a job.

I know that my DC pot (now consolidated – though that was a bother) is still to be paid back to me via annuity or flex and fix deferred annuity or as I please using “freedoms”. I went to the launch of multi-employer CDC in October and was the only person at the round table who asked his own question. I asked “can I swap my pot for a CDC pension?”  and asked it with passion! I asked it to Torsten Bell, the pension minister.

He looked at me with that “you’re trying to catch me out” look he has, but I wasn’t. He said that I would need to wait and see and I was going to follow up with one about “targeted support” but he gave me a look that told me not to!

In conclusion, CDC seems to me a good thing for people who don’t want to have to pay to get advice or take chances without doing so. You will just get the pension that your money earns and a very highly regulated outcome (if the Pension Regulator are true to fashion with DB pensions and DC freedoms).

You can of course make it a very complicated business , but for most people the choices will be down to how much extra to pay as “AVCs” and how to protect the family.