January 2023
11Jan

CDC schemes would have ‘weathered’ market turmoil

Aon said market turbulence would not have had an adverse impact on members’ benefits A ‘well-designed’ collective defined contribution (CDC) scheme would have withstood recent market turmoil, according to Aon. In an update to the firm's Collective DC in adverse markets paper, originally published in October 2020, Aon said an efficient CDC scheme would have been able to resist the financial turbulence in the markets throughout 2021 and 2022, without having a negative impact on members' benefits or their retirement outcomes....

January 11, 2023
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September 2022
15Sep

UK. CDC and ESG: A truly long-term game

This summer’s introduction of collective defined contribution pension schemes was a watershed moment for the industry. With the rules now laid out and the first scheme — Royal Mail — expected to be launched imminently, attention is turning to scheme design, and in particular investment portfolios. With environmental, social and governance factors now firmly at the centre of pension fund investment, many proponents of CDC believe that it is perfectly positioned to progress the responsible and sustainable investment cause to the...

September 15, 2022
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August 2022
01Aug

Collective defined contribution schemes launch in Great Britain

Providers in Great Britain are now able to apply to launch collective defined contribution schemes, a development hailed by pensions minister Guy Opperman for its potential to “transform the UK pensions landscape”. Under CDC schemes, employers and employees pay a fixed rate of contributions, collected in a manner similar to defined contribution schemes. Benefits are paid with a target in mind, similar to defined benefit schemes, but with the prospect of variable increases — and the possibility of decreases. Read also...

August 1, 2022
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June 2022
14Jun

UK. TPR’s new DB funding code expected in September 2023

The Pensions Regulator expects its much-anticipated new defined benefit funding code to be in place and operational by September 2023, according to its latest corporate plan. In the document published on June 13, the regulator explained that the delay in the new funding rules, and in its second consultation on the matter, has allowed it to take the time it needs “to develop the right shape for our DB funding code”, while wanting to take the “opportunity to learn from...

June 14, 2022
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09Jun

Investment Choice in Collectivised Pensions

By John Armstrong & Cristin Buescu Investment choice is a central theme of UK pension policy. This paper shows how a collective pension fund can be managed in a manner that allows individuals to choose how their pension is invested and their schedule of pension payments. The potential benefit to investors of such a fund is quantified on the assumption that they choose to invest optimally. For our indicative choice of individual we find that they would need to invest...

June 9, 2022
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September 2021
23Sep

CDCs could be the new annuities, say regulators

Collective defined contribution schemes could become a popular alternative to annuities if their risks can be contained, according to the Pensions Regulator and Financial Conduct Authority. Speaking at a Work and Pensions Committee hearing this morning, David Fairs, executive director at The Pensions Regulator, said CDC schemes had many advantages over defined contribution schemes and in future could be rolled out to multiple employers and master trusts, hence become the new pension product of choice for many. CDCs are a half-way...

September 23, 2021
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02Sep

UK. Draft CDC regulations hampered by poor definitions, industry warns

The government’s consultation into draft regulations governing collective defined contribution schemes requires more work on definitions if these pension funds are to be properly implemented, with the Pensions and Lifetime Savings Association warning it could create a “back door” for unscrupulous employers. In a CDC scheme, contribution rates for employers and employees are set in advance, and members pool investment and longevity risk. These pension funds provide income in retirement, though the rate of increase varies and pension reductions are...

September 2, 2021
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August 2021
30Aug

UK. Govt encouraged to make CDC pensions more flexible to improve take-up

The government should make the framework for collective defined contribution (CDC) schemes more flexible to encourage take-up and make it fairer for younger members, according to LCP. The firm’s response to the government consultation on CDC regulations said further flexibility was needed due to the framework having been drafted with the Royal Mail scheme in mind, leaving sponsors who may wish to explore different benefit structures facing limited options. Read also UK’s biggest pension scheme set to screen investments based on...

August 30, 2021
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27Aug

UK. Do CDCs offer the best of both?

The DWP recently launched its consultation on draft collective defined contribution pensions scheme regulations, which is due to close on 31 August. Once these regulations are firmed up, by the end of this year in all probability, single or connected employers will be able to open collective defined contribution schemes for their employees. The Royal Mail, in a show of unity between employer and trades union, will be the first to do so. We will have to wait until early...

August 27, 2021
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July 2021
23Jul

UK. Can CDCs solve the pension funding problem?

Defined-benefit (DB) pension schemes have been in decline for years and in most professions younger employees are offered defined-contribution (DC) schemes, which lack many of the former's benefits. But a new option aims to deliver the best of both types of pensions. This week, the government has issued a consultation on draft legislation for Collective Defined Contribution (CDC) Schemes, spurred on by Royal Mail (RMG) which had been lobbying for new legislation to accommodate CDCs since 2018. CDC pensions work by...

July 23, 2021
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