This is not having a go at Callum Stewart, quite the opposite, I am in the queue somewhere myself!
What’s going on when people talk names (nomenclature if you’re posh) is to try to compress thinking into a word or phrase that gets people going on their own journey. It moves us towards loving, living with or loathing it (whatever “it” is).
I suspect that Brian Henderson, who has featured a lot on this blog recently, comes closest to getting a lexicon of choice for people who have pots and reach retirement. But is anyone but a pension person going to know what is meant by a “target income”? Do I want to know what my pension is going to be?
Do I get a guaranteed wage in retirement from a secure income or do I get a pension at all from drawdown. This is about classification (taxonomy) and it does pretty well but stops short of getting me excited! The word that’s missing from his replacement for CDC is “pension”. Employers think “pension” which is not in CDC or “target income”.
While I am having a nomenclature moment, can I object to the use of “whole of life” as a classification of a workplace version saving of CDC (the collective pension)?
Whole of Life is a classification for life insurance policies that pay whenever you die, providing the premia have been paid.
This is the opposite of a pension plan which pays out till you conk out, no matter how long since the last premium was paid.
Whatever we call it – can we have it to provide us a pension, you clever folk?
I was with a union man yesterday complaining that there was a lot of comment from actuaries on the sideline. He wanted players on the pitch getting on with the game , building what he called CDC pension schemes.
Come on XPS – how about giving it a go! Come on BNY and Aviva and Standard Life, you’ve all got clever people on Callum’s list, can’t you get a CDC underway? Is it the name that’s stopping you!
To date I have only heard Pensions Mutual , Arboreum and TPT expressing a wish to get authorised as soon as possible. Everyone else who says they’ll do it talks of 2028 or 2029 to set going. Is it really a priority or is another 2 or 3 years discussing what CDC is called, part of the fun?
Pension people (especially actuarial consultant) are having these discussions endlessly. Everyone copied in by Callum was a consultant of one colour or other. What about those who are trying to get a collective pension scheme over the line?
Oops, there’s me calling it a collective pension again!
Of course there are other collective pensions – DB for instance – but for private companies, these collective pensions are parked in the garage and not being driven anymore!
There is a case for a collective pension at retirement but much more of a case for a collective pension , like the state pension that accumulates as you go through life. In fact a collective pension based on earnings is what the State Earnings Related Pension set out to be. It was guaranteed by the state and had no fund but it felt very similar to what you’ll feel in this CDC style collective pension.
CDC has as much chance of catching on with the general public as SERPS and we should use words that people are used to. Terry Pullinger calls the CDC a “retirement wage” which is what I’d like our collective pension when talking to members but when talking to an employer, collective pension is fine and it’s what I hope catches on.
Is not the real problem that the word “pension” is attached to products that are not pensions – e.g, should Personal Pensions not be renamed Personal Later Life Savings Plans. DC contributions renamed Contributions into a Later Life Savings Plan managed by a Trustee. etc.
We must also not forget that DB pensions are also Collective Pensions – strictly a Collective Pension with Guaranteed Benefits as opposed to a Collective Pension with Targeted Benefits (UMES CDC). Neither of which is currently available for the individual to purchase.
The name given to R-CDC, being effectively a retail product, is more significant. You could call it a purchased Annuity providing Collectively Targeted Annual Pensions.
But give me a DB Pension anytime!
“Later Life Savings”: you’re almost there.
Better Later LIfe Savings = BLISS
But it really isn’t savings is it? It is income that increases each year with inflation, there is some tax free cash to begin with but a pension is a wage in retirement, quite different from DC pots which can be regarded as savings (blissful or otherwise!)
Thinking about this debate on what to call R-CDC led me to see how different the intent is to a US Variable Annuity. An extract from the SEC description about the drawdown phase of a variable annuity states:
“During the payout phase, your annuity contract may permit you to choose between receiving payments that are fixed in amount or payments that vary based on the performance of mutual fund investment options.”
The second option sounds a lot like R-CDC without explicitly saying if the mutual fund investments are managed on a collective basis.
But all that leads me to a new name proposal of ‘Collective Variable Pension’
That sounds like something nasty you can contract like a veruka,