There was a time when DC pensions simply built up capital in equities and offered a cliff edge into bond-based annuities. It was a time when everyone had to buy an annuity and when equities had their last great run. When things turned sour for annuities around the millennium, the actuarial concept of matching became popular.

Scottish Life (to my memory) were the first provider to start moving people from equities to defensive assets on the basis that it got people our of dangerously volatile equities and into gilt funds that matched the cost of buying an annuity.  There was sense here, it was what was happening in DB which were switching from accumulation funds to funds actually paying pensions.

But since then, much has changed. The mania in DB schemes to de-risk everything in favour of buy-out by insurers has subsided. In DC, more fundamentally, the requirement to buy an annity was relaxed first with large DC pots and in 2014 for everyone.

But the de-risking mania that led to every DC scheme being “lifestyled” has not been rolled back. Though annuities are no longer a default, lifestyling  de-risking most definitely is. It is still a feature of most master trusts , sole sponsor occupational DC plans and group personal plans.

In this statement of angst from academic Stephen Thomas, we get the views of someone coming to DC pensions without the history of DC entrenched in his psyche.

Stephen Thomas is a professional thinker. He has no reason to hold back and he doesn’t. Glidepaths and de-risking have no place (for him) for people in their fifties and sixties. Here he is – quoted by Christopher Marchant in Corporate Adviser.

Setting a glide path in retirement is ‘completely useless’ and equities investments should be held in a portfolio for as long as possible, Stephen Thomas, a professor of finance at Bayes Business School, has claimed.

Thomas also proposed a sequence risk ratio which divides the average or expected perfect withdrawal rate by the standard deviation of withdrawal rates across return sequences, providing information beyond the Sharpe ratio in retirement.

“Glide path investing is completely useless, and you should stay in equities to the very end,” says Thomas.

In supporting his case, Thomas pointed to fallout from the 2008 financial crash in the US. According to the SEC, 2010 target date funds lost almost 25 per cent on average in 2008, while individual funds’ losses ranged from roughly 4 per cent to 41 per cent.

At the same event, hosted by investment platform Mobius, Alison Fisher, senior director at Willis Towers Watson, argued that retirement collective defined contribution could materially improved returns for scheme members.

“There are three big problems retirement CDC helps to solve,” says Fisher.

There is of course a third way that makes sense of both Stephen’s and Alison’s comments. You cannot get a guided retirement fund to stay in equities (as it will flex and fix into an annuity (albeit in much later years). You can’t get a retirement CDC fund to require “pension” funds to stop de-risking. The third way is that there is but one from the point at which you enter the pension plan till the day you die and that fund can have an infinite horizon where young people replace old people who die.

Such a fund is what Stephen Thomas wants and perhaps he wants social insurance which avoids lifestyling but managers longevity through collective pensions. If so we are on the same page. I was not in the audience when he and Alison were talking but I was there in spirit. I hope that WTW will find a way to get as close to UMES CDC as R-CDC allows and I hope that people can invest in equities till death by using a collective pension currently known as  “workplace” or “whole of life”,

Neither Stephen or Alison sound keen on de-risking and neither am I. We will inevitably have some bonds in CDC to de-risk the worst case where underperforming CDC can neither fix the fault or pass the scheme to someone who can. In such cases the need to swap CDC pensions for annuities and that is the last stop. That is the only reason for a collective pension to hold any pensions.