I never thought I’d see the day that Mercer embraced CDC – hurrah!
I am happy to say that Ruari has long been a member of our pension group and makes an excellent leader of UK CDC for Mercer.
The shift in the market sentiment within our bubble is astounding, CDC is being regarded as part of our future. But while large consultants are one thing, quite another is the view of the wider market of employers and ordinary people.
Change will be driven by Unions reminding employers they can give staff up to 60% more pension at no cost; – using CDC workplace pensions.
“ Change will be driven by Unions reminding employers they can give staff up to 60% more pension at no cost; – using CDC workplace pensions”
Could someone help the compliance department to craft an explanation of the 60%
I always attribute the 60% remark to the Government!
But does its veracity matter to the employer or the employee and whose compliance department are you concerned about?
I have seen various supported calculations varying from 38% to 83%.
The adviser to an individual is required to write a reasons why letter. If 60%,38% or even 83% is used as part of the motivation to move investments then the reasons why letter needs to justify.
If any of these extraordinary returns are to be recommended surely it should be possible to explain.
Would this product encourage reduction in contributions?
Thank you for the response there is a range of outcomes I have only seen the 60% number.
If you are genuinely healthy and live to 95 in a CDC scheme that assumed you’d die at 82, you will come out on top.
You are effectively winning a bet against the “house” (the pool).
But you won’t necessarily find a “Blackpool-only” fund to exploit. Most upcoming CDC schemes will probably be “Multi-Employer” (Master Trusts) that pool hundreds of thousands of people from all over the UK, which averages out those regional extremes.
The reasons why report needs to give a range of outcomes including an income that could fall.
The Govt statement is that CDC provides up to 60% more pension. The number is from DWP and when pressed they will show you actuarial modelling against DC outcomes from 50 – 75%. The highest numbers I have seen have been from the PPI. We have done modelling using very conservative assumptions that sets CDC at lower than 50% but using ordinary actuarial factors , agreed generally, the number is around 60% more than taking an annuity purchased by money from a DC pot.
I have also had it from TPR that I do not have to be an adviser authorised by the FCA to quote these numbers!
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