I woke on a Saturday morning to this comment from someone who works at the Bank of England. It was in response to my congratulatory blog that Mercer finally have a lead consultant to promote CDC.
You can read the comment on linked in here
Gerard works for the PRA, he was educated in South Africa but been in the UK most of his life , an illustrious career that has lead him to the PRA where he now is a technical specialist in pensions and life insurance. I have reached out to him to be linked in and understand his and by extension the PRA’s scepticism.
Let me explain the PRA to readers who do not move in its circles. It regulates the insurance companies and is part of our Bank of England. So if Gerard is questioning the validity of the DWP’s claim then there is a fault in Government between those promoting DWP and those negative about its claims. The Minister who introduced the UMES CDC which makes it a workplace pension that any employer can use is Torsten Bell, Torsten is a Minister in the DWP but also the Treasury. We would hope that the Treasury and Bank of England are on talking terms! Why am I being asked for an explanation of a Government claim. To be clear, the claims were made by the DWP on 22nd October 2025. You can read the Government’s publication here.
I am happy that we have a Bank of England and PRA that pays its staff a defined benefit pension scheme and recognise that backing up BOE’s staff’s promised pension with investment in Government Gilts for the main part in very defensive funds. This is from the latest Report of the Bank of England’s Pension Fund
Super security comes at a price. This fund has achieved growth of less than 4%
The scheme is non-contributory meaning that the tax-payer is finding the entire cost of the scheme
My answer to Gerard and the PRA
I do not like paying a lot of tax but I am prepared to accept that £155m paid into the BOE pension scheme is a small drop in its overall costs and indeed the value that BOE brings.
But it is not setting an example that can be followed elsewhere. In the private sector we have seen Defined Benefit pension schemes closing down for contribution requests much lower than the 55% the BOE paid into the scheme it sponsors (year in, year out as normal contributions).
But if a lucky person in a 55% non-contributory DB scheme is sceptical of CDC schemes delivering up to 60% more than the pension that will be shown on SMPIs and the ERIs of pension dashboards arising from DC pots, then he is out of touch.
We in the real world where employers struggle to pay 8% of band earnings of which 5% is paid gross by employees , are struggling to pay any more into pensions. That CDC can – mainly through improved investment (70% of the 60% according to LCP) – pay better pensions you should be very happy. It means that Britain will get more prosperous and the BOE will continue to flourish.
As it is, I am working on no salary as are all those working at Pensions Mutual so that we can get a CDC scheme to market in early 2027. I think we have the right to trumpet the potential gain promised by the DPW.
This from early in their 2022 statement
That document finishes quoting a firm spent much of his career at (Willis Towers Watson)
The Department’s Impact Assessment published 18/09/2025 is available here
The Bank of England’s PRA may be above the rest of Government, they are certainly getting pensions that say they are.
