We save for many things in our twenties. We save for a deposit on a house or to get married and have a family. We may have to start paying off student debt and big rent and council tax payments, we will almost certainly be paying income tax and national insurance. To save for our retirement may seem a low priority but we do so , because of auto-enrolment into a workplace pension from 22 and very few of us opt out. Reluctantly we recognise it is the right thing to do.

We buy our house get married and start a family in our thirties and before we know it we are in our forties and more than half way to 55 when that money we put away in our pensions can come back to us. In our forties and fifties, we start looking at out pot (or pots) and from next year (we hope) we’ll be able to see them on a dashboard telling us how they, along with the state pension, will help us wind down and eventually retire.

By the time we get to our mid fifties we find that pot accessible and very tempting. Some of us blow the pot but most of us keep rolling it up. The pension dashboard will translate the pot into a pension and we can see if we can afford to retire on our deferred pay.

That’s how it is today but it may not be how it is in the future, not if we switch from saving in a pot to building up a pension. The reason that might be is that the Government , along with clever actuaries and researchers has worked out that the deferred pay you’ll get from saving for a CDC pension will be up to 60% more lucrative than paying yourself out of the pot.

That may sound like “magic beans” but it’s not. The power of investment in real things like equities, infrastructure and property is huge. It is why pension funds battle through and pay promises, it’s because they are regularly funded and have been fully invested. Nowadays these DB pensions are in an endgame and less invested but the baton is being passed to CDC pensions , run for employers to offer staff deferred pay as pension.

The key to it all is that CDC pension schemes are not invested for the short term but have an infinite investment horizon meaning they can invest where the biggest returns are. It’s why asset managers are excited by CDC and it’s why one leading consultancy (LCP) has recently stated that nearly three quarters of the improved pensions from “whole of life” pensions comes from long term investment. Here is what an actuary (Derek Benstead) explained the success first of DB and now CDC with

So long as CDCs do not closed, they stay in an investment sweet spot that means the CDC promises can be met and even exceeded. CDCs can take over from DB as sitting in the “sweet spot” with an “infinite time horizon”.

We don’t need to get 20 year olds to get excited, we just need them auto-enrolled into CDC. We can expect some in their thirties and more in their forties to get excited and by the time people are in their fifties and sixties we can expect those who’ve been in whole life CDC schemes, to be a lot more comfortable that retirement will be affordable than if they just have a pot- 60% more comfortable if “adequacy” is the measure!

Behind all this is collective investment, which is the future for pensions, just as it has been its past. The success of pensions is its investment in the kind of things its good to own for a long time! Because I want to have a shower of money that works for ever after!