Employers wanting their pension contributions to pay a “pension not a pot” have at least another 6 months to wait till any proprietor and their trustees can offer a workplace CDC.
The regulations are indeed a “game changer” and I had a bacon sandwich with former pension minister Guy Opperman yesterday. He’s quoted in this article.
Commenting on the regulations taking effect, former pensions minister and Aptia strategic adviser Guy Opperman said: “Today’s announcement is a landmark moment for UK pensions and a major step towards making CDC a reality for millions more savers.”
He said CDC has the potential to be a “game changer”, offering “significantly improved” member outcomes and greater income stability in retirement.
He added: “The focus now must be on turning the promise of CDC into practical, trusted solutions. That means building awareness and understanding, delivering clear and engaging member communications, achieving the scale needed to maximise value, and maintaining strong governance.
“If government, regulators and the pensions industry work together, CDC can become a mainstream feature of the UK retirement system and help deliver brighter futures for generations of savers.”
This is bang on. But let’s be clear, there needs to be a giant heave from everyone who wants CDC to happen. It will take a lot of time, money and patience to get a CDC scheme authorised, both from those seeking authorisation and from the Pensions Regulator.
And most importantly, CDC schemes must be administered properly. I am with Festina Finance UK country head Dan McLaughlin who said much of the discussion around CDC to date
“has understandably focused on regulation, governance and scheme design”. He said while these are “essential building blocks”, a framework alone “will not deliver successful outcomes unless equal consideration is given to how CDC will operate in practice”.
He added:
“As CDC moves from policy development towards implementation, the focus must also turn to the operational foundations needed to support schemes effectively. High-quality data, robust administration processes and flexible technology infrastructure will be critical to managing complex calculations, supporting effective decision-making and communicating clearly with members.”
McLaughlin continued:
“Recent surveys conducted across the industry have shown growing interest in CDC, but also a degree of caution. That is understandable. CDC represents a new approach for the UK pensions market, but it also highlights the significant opportunity ahead.
“CDC has the potential to become a credible third way between traditional defined benefit and DC models, providing the industry with an exciting opportunity to rethink how retirement” outcomes can be delivered. However, getting the operational foundations right will be essential to building confidence among trustees, employers and members”.
This is why the DWP started setting up CDC when Opperman was Minister of Pensions, thanks to Torsten Bell for finishing the job. Why we had Steve Webb promoting “Defined Ambition” and Lord Pitt-Watson long-time a friend to CDC and now a Treasury Minister.
This is why the Pensions Regulator is since August 1st requiting CDC schemes to run within its CDC Code.
This is why we need employers to want a “game changer”.
