Two things have happened in the last few weeks that will make a change. The first was the arrival of a new Government and yesterday we had the arrival of a new type of workplace pension.
First – what we can expect from Government?
Second – how does this relate to workplace CDC?
Listen to John Healey’s short clip- it ends with a statement of intent – to advance working people in this country.
As financial folk , the readers of this blog will pay as much interest to the words of our Chancellor. Though those of the Prime Minister give a taste of what’s to come, the ingredients that go into changer will come from John Healey and number 11.
“Advancing working people in this country” is what I’d like collective pensions doing. Working people can no longer get a pension guaranteed by employers; for one thing – if employers don’t know what it costs, how can wage negotiations work as they should.
From the meetings I have had, the union events I have attended and the webinars I’ve dialled into it is clear that employers see an opportunity with the new collective pensions to offer a better deal for staff without disturbance to their organisations.
There three themes that come out loud from large employers and the unions who are working with them.
The first is that governance of CDC workplace pensions cannot be like DC master trusts and exclude employers from the trustee boards. There needs to be some say in how these CDC schemes are run by those who pay into them and that includes the members.
The second is that larger employers are clubbing together around industry groups and want “sectionalised” arrangements that are run for them to a degree by them. This does not mean returning scheme management to employers, few have pension departments willing to become “Proprietors” of CDC arrangements (the Church of England is the only one we know).
The third is that unions want a voice. Here is the major difference between workplace CDC and existing workplace pensions. It seems that unlike 2012, when employers starting staging workplace under the new auto-enrolment, the emphasis is now not on collecting money but on paying pensions. This has brought unions like Unite, Unison, Prospect, GMB and CWU into promoting rather than dismissing CDC. The unions have dismissed DC as not a pension but a savings system. Unions want “pensions” that pay a wage in retirement and they think they have found something approximating to DB in CDC.
The success of CDC will rest with large employers
There is undoubted interest among large employers in a new type of DC pensions, one that makes life for them with unions, better for staff and which gives them some control back with what happens to the money paid by payroll to third parties.
But for CDC to be a success, employers will need a new kind of pension provider, what the DWP has named the Proprietor of a CDC scheme. We have yet to see the emergence of these Proprietors and the authorisation of the Schemes they want to offer. That will happen over the months to come and schemes will be available from early next year, starting to build pensions (not pots) from the middle of next year.
That is what large employers and some have made their mind up to pursue CDC as a workplace pension. They will need the schemes to choose from and perhaps there lies the challenge from the pension industry.
We hear a lot from consultants over what is needed but not a lot from potential Proprietors that they are getting going. The emergence of schemes as authorised is the next steps in what started in 2017 when Royal Mail came to an agreement with their union to offer a scheme to all 120,000 postal workers in their organisation.
We have set up a Proprietor in Pensions Mutual that will play a part in this. I know of two others that have declared so far. I hope that there will be more as demand so far exceeds supply.
