Here’s what I’m talking about…

CDC or Collective Pensions is missing !

It’s a simple thing for already people but it appears quite hard a thing for DC Trustees. It’s the collective pension (aka CDC).

If you read Nausicaa’s post there is, despite it being hear and authorised by TPR, there is no mention of CDC. DB and DC yes but CDC no!

Why is CDC important to trustees now? Well from this time next year there are going to be employers directing their staff’s workplace pensions to CDC plans and some of the employers who I’m speaking to are listening to their members (via their unions). They are saying  to who will listen that as well as redirecting future contributions that they want pots to transfer to CDC schemes to get pensions rather than confuse staff with pots (their words).

When I speak to DC trustees they are not comfortable that individual or bulk transfers (with consent and without it) are in the member’s interests. They use words about the move to CDC as being “irreversible” and “unrecoverable” as if it weren’t a DC to DC transfer but a transfer to annuity.

But the DWP have issued in June a clear statement that trustees cannot stand in the way of individual and bulk transfers unless they have clear evidence that a transfer is not in the member’s interest.

In my view , we need a clear statement from the authoriser of CDCs – the Pensions Regulator – that they will not be denied individual and bulk transfers from DC to CDC if requested by an individual or in the case of bulk transfers, the employer.

Why this is important from the CDC is that denying transfers is standing in the way of progress of CDC plans to authorisation. We simply can’t commit to the huge amount of energy and money unless we have a business plan that works. CDC schemes business plan will not work without transfers and a business plan is part of the authorisation process.

So clarity on what an authorised CDC scheme stands for, must be made clear to Trustees in posts like this, in speeches like the one delivered by Nausicaa Delfas to the Professions Pensions Trustee Survey yesterday.

To be authorised by the Pensions Regulator as a CDC that can take contributions is a statement of a scheme that has passed a number of tests. It is more than a one off process. An authorised CDC pension is required to meet and beat those tests each year. If it cannot, it must first of all set things right and if it can’t it must merge with another Scheme and if it can’t do that it must return assets to the DC world. So in the worst case, which we consider is unlikeable as there will be a lot of regulatory capital in place to set things right, the worst that can happen is it being back to square one.

So all this talk of “irreversibility” is a little drastic! We put our trust in TPR whether DB, DC or CDC and money can move around the system because we have confidence that providing the scheme is being regulated to the standards we expect (and pay for from the levy)  then we can trust value for the money of the member’s is in safe hands.

This is a simple message for the Pensions Regulator to deliver.  We hope that it will be delivered to pension trustees in the UK. It is a message which is valuable for CDC to work in the way the DWP, TPR, Unions , Employers and ultimately members need it to.

It only needs the Pensions Regulator to make clear what everybody knows, that CDC give valuable pensions, to make everything to fall into place.