In a new paper from BESTrustees, professional trustee Paul Brice looks at CDC schemes, a developing area of the pensions landscape that many commentators believe may fill a gap between the decline of open DB schemes and prospective pensions inadequacy issues with individual DC or personal pension arrangements.
We begin here with an excerpt but to see and download a full copy of the paper, please click here.
In an environment of declining levels of open Defined Benefit (DB) pension schemes, and concerns around inadequacy of Defined Contribution (DC) or Personal Pension savings, Collective Defined Contribution – CDC – schemes can offer a number of attractions.
Analysis suggests that these schemes’ pooling of both longevity and investment risk – discussed further in this paper – can offer retirees the potential for considerably improved levels of pension compared to, for example, a purchased annuity.
But, whilst CDC schemes – whether “whole-of-life” or “Retirement CDC” – have been in widespread use in a number of other countries for some time, their introduction in the UK has only been comparatively recent; and, as at the time of this paper, only one scheme – the Royal Mail Collective Pension Plan – has achieved authorisation (although a number of other organisations have announced they will launch multi-employer or master trust versions once the law allows).
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