It’s been an exciting week for politics, with a new Prime Minister arriving at Downing Street, several new faces in Cabinet and a slew of policy announcements. Myself and others have long campaigned for CDC pensions believing that they deliver not just expected higher outcomes but a range of good things for society too.

But how does CDC fit with a new Government? To answer this question I’ve been scanning all the usual news sources for what priorities Andy Burnham has declared in his first few days, and then asking whether CDC pensions can help him to resolve the challenges he has laid down for his new Government.

These are the top five declared priorities that I have found:

1.    Housing.

“End rough sleeping” was Burnham’s first instruction as went through the door of No 10. “And we will build more Council Homes” he declared in his first speech.

The policy is the opposite of Thatcherism, where more people were encouraged to own their home, and it will lead to more people renting, and over time more pensioners renting in retirement.

The lifelong income that CDC provides, targeted to keep pace with inflation, is a great match for a pensioner that needs to pay rent throughout their retirement. It avoids the risk of poverty in later retirement that is very present for those in other forms of retirement income where a disproportionately high share of the real value of the retirement income may be consumed in the early years leading to rents becoming unaffordable from a diminishing income in later years.

2.    Cost of Living

Burnham told his first Cabinet that he wants to lead a “cost of living Government”. This doesn’t seem to be about CPI, which at 2.6% sits comfortably within the Bank of England’s target range of 1% to 3%. Rather it’s about the sheer unaffordability of everyday life for many, with Joseph Rowntree Foundation reporting that 7.4million low income UK households could not afford at least one essential item like food and heating in the last 6 months. The uncomfortable choice of go hungry or go cold.

With the Pensions Commission addressing adequacy of retirement incomes, some are clamouring for an increase to the statutory minimum AE contributions. CDC, which delivers expected retirement incomes around 30% or more higher than DC, could be the solution that means unaffordable contribution increases imposed on low income households simply aren’t necessary to solve adequacy.

3.    Defence

Some of us go to watch air shows for pleasure, but when Andy Burnham spent part of his second day as Prime Minister at the Farnham International Air Show it was to have the right background behind his third policy priority. Much like you or I might choose a carefully curated background behind us for a critically important Teams or Zoom call.

“We are going to honour our commitments on defence” he declared. And we have all noted how the former Defence Secretary John Healey who resigned from Sir Keir Starmer’s Government over his criticism of inadequate money being found for Defence has now been made Chancellor.

We can expect new ships, new missiles, the first autonomous fighter aircraft to follow. Our kit will be more high-tech and more built in Britain or Europe than our current dependence on America. But these things take a long time to design and build – often ten years plus.

The long term investment horizon of a CDC scheme means that CDC could provide the finance to build the next generation of defence capabilities. In ways and quantities rather greater than  either DB or DC could.

4.    Getting more young people into work.

Today over one million 16 to 24 year olds are not in education, employment or training.

That’s 13% of young people classed as “NEETs”, a rate that’s three times that of the Netherlands and clearly out of kilter with most European countries. I find the term NEET somewhat pejorative as it almost implies that a sofa-surfing benefits-fuelled existence is their lifestyle choice. Only don’t try saying that to a school or university graduate who has submitted over 100 job applications without success, and often without even a response as the few employers with jobs are overwhelmed by applications.

DC has been criticised for investing such a high proportion of assets overseas. Although it’s trying to do better, with the Mansion House commitment and the Cushon-Eversheds opinion on investing to build better infrastructure. Yet actual progress towards weaning DC schemes off their fix of overseas allocations that reduce the cost of capital for US businesses has been painfully slow.

CDC, where the pressure will be much less about historical short term investment returns and much more about the Actuary’s best estimate of long term future returns  feels better placed to invest in ways that will create British jobs going forwards.

5.    Make politics more collaborative

The new Prime Minister wants to take power out of No 10 and carry it to every postcode in the land so they can do more.

I’m still wondering quite what this means, but I see it as a bit like Thatcherism yet a bit different. The Iron Lady wanted to take power out of central Government and give it to individuals. Each and everyone one of us could have our own Personal Pension. If we didn’t like our employer’s AVC scheme, we could save In our own Free Standing AVC scheme. Yet Burnham doesn’t refer to passing power down to individuals but to every postcode, a little collective. (I sit at the end of a row of 14 houses that share the same postcode, and yes we do do things collectively, like a Royal Jubilee tea party or celebrating a resident’s 80th birthday.)

CDC being a collective enterprise maybe we will find new ways for people to collaborate, new groupings that bring workforces together with a common goal of better meeting the needs of retirees through shared endeavour. The mooted aim for a CDC for social care workers could be a great example of care providers working in harmony rather than in competition with each other. And do more for a very hard pressed group of very hard workers than central Government could do sat in No 10.

Conclusion

I give a resounding “yes” to the rhetorical question about whether CDC fits with the new Government’s priorities. Because CDC can provide the support and the framework for Government to make progress on Housing, on Cost of Living, on Defence, on NEETS and moving power out of No10 and into new collectives.

If I was sat around the Cabinet table I’d be advocating CDC because it really can help with so many Government priorities. Normally life is like a plate of spaghetti, and if you pull the end of one strand, something you didn’t want to move over the other side of your plate does! Our Regulator is going to make us set out a balanced description of all the upsides and downsides of CDC, but I struggle to identify any genuine downsides.

I had a momentarily distressing thought while writing this article that maybe Andy Burnham had never heard of CDC pensions. It was quickly dispelled by a valued colleague who pointed out how closely Andy Burnham, as Mayor of Manchester, had been involved in the creation of Manchester’s Bee Network of yellow buses. Following on from its success at Royal Mail, CDC was considered as the pension scheme for Manchester bus drivers, but the multi-employer version of CDC didn’t come online at the time.