It’s been a long time since I regularly went to the West London NAPF group. I learned a lot from it and I found myself learning a lot at an evening discussion last night. Here’s a report from Judith Codling which captures the thrust of the debate

A simple pension or a choice of lifetime retirement options?

I had a question that I could have asked had there been time and if the audience had been the kind of people who will buy CDC for their staff or stick with DC and Guided Retirement.

My question would have been whether they’d prefer CDC to have Guided Retirement inserted into it so that people could make a choice of what kind of retirement income they got.

My suspicion is that those who want staff to get deferred pay and a wage in retirement are going to avoid retirement guidance while pension professionals who want savers to engage with what best suits them will prefer guided retirement.

The room did not have a vote on whether people would want CDC or DC for themselves, there could have been a second on whether it was the right workplace pension for their firm’s workforce. The third might have been to have done what Chintan Ghandi advocated, a bit of both.  That’s what Aon are going to be offering at some time in 2028 or 2029 and it’s what I’d expect from a consultancy – sitting on the fence.

Maybe we will see staff being offered either membership of Aon’s master trust or Aon’s Collective (CDC) pension. But I think that here we are leaning towards the kind of choices that Carolyn Jones of Scottish Widows had found those they surveyed found very hard.

In any case, the Government has decided that CDC is not a retail pension , at least not a pension can choose to join without their employer having decided that’s what they’ll use as their workplace pension.

Michal Jones of Sackers pointed out that members in CDC schemes will however be able to bring their pots into their CDC workplace pension (unless they’re in the Royal Mail CDC scheme which doesn’t allow this).

But here we are in the most contentious area of CDC to date. The members of staff defaulted into the Retirement collective pension scheme (RCPS -previously known as R-CDC) will have a year after being guided into a CDC plan to reverse out. Meanwhile CDC members will have to opt-out before normal retirement date when they’ll start getting a CDC pension.

So for those in CDC , DC is only available from a transfer using a Cash Equivalent Transfer and the Value that we call the CETV. What is most contentious is whether members get value for money from the transfer – whichever way they go (DC to CDC or CDC to DC) and Chintan reckons that most people in CDC will have DC as well.

I am someone who wants to keep things simple and I’d like to think those like me, will try to get behind one or another. People will either consolidate their pots int a super pot which could pay a lifetime income from Guided Retirement working on a flex and fix basis. Those who want to retire on a private pension may consolidate their pots into  a CDC scheme (most easily a workplace collective pension where there is not everything going on at the point of  Guided Retirement happening).

Assuming that these transfers are frictionless and that people conclude they are getting value for money from the transfer I think that Pensions UK title;s  “DC or CDC” to be one that most employers will consider and that those who aren’t in workplace (UMES CDC) collective pension may well have a choice to taken, that is if guided retirement offers a default and an alternative.

Confused – as an employer I would be, as DC trustees I would be. But if you’re an employer who has stopped auto-enrolling and paying into DC pots, I reckon you will have avoided guided retirement altogether.

Let’s hope a future Government doesn’t up the simplicity of collective pensions by forcing someone in a workplace CDC to experience guided retirement. That seems a really bad idea!