My immediate reaction to this headline was
“if members have complex demands”
they shouldn’t be in a CDC pension scheme, they shouldn’t be in a pension scheme full stop.
If people have a need to flip-flop between income drawdown and a pension, they should have the freedom to do whatever they want. It is not freedom from pensions that you get when you are paid a pension but the opposite.
I have just been reading a marketing document from TPR which makes it clear that CDC schemes should be honest and not try to be what they aren’t. CDC is not a guaranteed income, it is not offering a pot to get your own valuation at a minute’s notice. Nor is it offering the freedom you get when drawing down from a pension pot.
So for a great number of sophisticated people who value all the above, CDC is a non-starter. If thy find themselves in a CDC plan they should consider getting out and taking a transfer value to a personal pension or perhaps a DC occupational scheme.
If the CETV doesn’t look “good value”, then advice should be taken as to what to do. I don’t expect that CETVs will rank high on the list of priorities for trustees who will be more involved with ensuring fairness for those who are being paid a pension. IF you are getting paid a pension, I would not expect you to have a transfer value but that may be allowed by trust deed and by permission of whatever changes to legislation occur in future.
I can imagine that if a DC scheme serves up a retirement CDC either as an option or as the default for those who take no decision by a certain date, it will make it clear that the choice taken to be in a CDC is as definitive as the purchase of an annuity.
There may be ways to flip-flop introduced to allow the sophisticated to play the market but I’d be most surprised if many people took such options. These people are not into maximising income, they are interested in capital.
I don’t want to fall out with my good friend Paul Waters and would be interested in how he sees CDC becoming more flexible and better suited to those with “complex needs”. But I am reminded of another friend – Glyn Jenkins of Unison – who reminds me every time we meet that simplicity is a rare thing of genius.
Glyn would look at me with that fierce stare and remind me not to fall a victim of complexity, Paul would remind me that choice is cherished by consultants!