As I now have a compliance officer at Pensions Mutual, I have been admonished for my over exuberant promotion of CDC as a way of delivering workplace pensions. I cannot name names but I’ve had meetings with TPR high-ups who’ve said the same and of course they are right.
The formal promotion of a product as better than any other is none of the things that I or my compliance director nor the Regulator think’s a good idea. It is not for me to decide whether our CDC scheme is better than another, that is down to an employer and (usually) their adviser.
This time last year I asked a friend who is senior in a large employer what he wanted from me and he said that I should make a CDC proposition that allowed him to have a say in its delivery of pensions to his staff. I have learned that the best thing I can offer this gentleman is the platform, the tools and the people for him to shape a CDC scheme that improves the pensions of his staff without curbing the growth of his company.
Why do I have to sell the concept of CDC anyway? This is from the DWP’s Impact Assessment on UMES CDC.
The concept was delivered to the nation on 22nd October when the DWP published its Impact Assessment that agreed with pension’s actuarial consultants that CDC could deliver up to 60% more than a conventional DC scheme.
It is not for me to say that is my discovery – it isn’t!
This is from the DWP’s launch of CDC in October last years. My job is to help that to happen.
What I can say in balance is that CDC in not for everyone. A large number of people are saving for pension freedom and have plans to drawdown on a pot as they see fit. Many people will transfer out of a CDC as they have done out of a DB fund because they see value in doing that. We do not yet know if people will have to take advice for doing that but as a CDC to DC there are no guarantees to abandon and only the valuation of the unguaranteed projected benefits to turn backs on.
I can see good reason for employers whose employees prefer a pot to a pension to leave them to it. I hope that a lot of surveys will be issued by employers , perhaps assisted by member representatives. I suspect that such a survey will encourage employees to take some notice of their workplace pensions and engage with what they are going to get. Right now they get projections of a level pension known as a Statutory Money Pension Illustration and it should in time be comparable with a projected pension from a CDC scheme.
This will become even more important when people see the regular income available from their DC pot on the Pension Dashboard. This is likely to be available around this time next year if MaPS recent pronouncements are anything to go by.
I do not think it is for me to say how this comparison should be offered, that is for the Pension Regulator to help with. We hope that DWP and GAD and WTW and many others modelling will be taken into consideration.
As a consumer , someone at 64 with two pots of money that will add to my state pension in just over two years time, I want to take decisions that are right for me and I won’t transfer my pot into a CDC scheme until I have access to an authorised scheme my employer has chosen to participate in. I will want, if there is a time that I can take this decision, promotion of my choice that is made after reading information that will (thanks compliance director for this)
In short I will want my choice to be a fair choice just as I want my employer’s choice to be fair.
I am an enthusiast for what I see as right; so sorry TPR if I’ve been over exuberant about CDC for the last 15 years. I don’t need to – any more – Government is doing it for me!