CDC plays a role in consolidation and decumulation plans – Reynolds
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The government sees collective defined contribution playing a role in its consolidation aims, and the Department for Work and Pensions will explore CDC for decumulation, the pensions minister has said ahead of the chancellor’s Mansion House speech this week.
The new government is looking to expand CDC, Emma Reynolds told an audience celebrating the launch of the Royal Mail Collective Plan, the UK’s first CDC arrangement, in London last week.
“While CDCs don't feature directly in the pensions bill, we envisage that they will have a role to play in our consolidation aims, and in our proposals to require schemes to offer retirement products,” the joint pensions and Treasury minister said.
Although CDC will not be included in the upcoming pension schemes bill, the bill announced in July is expected to bring new duties for trustees to offer a retirement income solution to members, or a range of solutions including a default offering.
Reynolds said a decumulation version of CDC could offer “a richer range of options”, adding: “My department will explore this further as part of our approach to improving security in retirement."
Decumulation will be included in the adequacy phase of the Pensions Review, she said, arguing that the current system was failing people at the point of retirement: “We need to find a way of giving people more help at that stage.”
CDC could be an option, she suggested: “You've really built into the product something that gives the saver and the person retiring much more certainty. So I think we will look at that in the round when we look at phase two [of the Pensions Review].”
As the government is keen to expand CDC, Reynolds also urged the industry to respond to the consultation on rules for multi-employer plans, so that schemes – such as master trusts – can offer whole-of-life CDC to unconnected employers. The consultation is open until 19 November.
Pensions Review update expected
Consolidation and productive finance could feature in Rachel Reeves’ Mansion House speech on Thursday, as part of an expected update on the Pensions Review.
Elsewhere, the Financial Times reports that London’s new Lord Mayor Alastair King wants to expand the current Mansion House compact to include not just private but listed UK assets, although it is unclear if the Treasury is backing this ambition.
