CDC – Feature
It does not take long to read The Pension Regulator’s (TPR) list of authorised collective defined contribution (CDC) schemes in the UK, since it comprises just one name. The Royal Mail Collective Pension Plan (RMCPP) received authorisation on 13 April 2023, which the Minister for Pen- sions, Laura Trott, declared: “a landmark moment [which] is just the beginning”. But the Department for Work and Pensions’ (DWP) enthusi- asm is not wholly shared by the UK pension industry with many questioning whether there is widespread employer appe- tite for CDC. Single and connected employers have been allowed to set up a CDC since last August, but the lack of schemes on TPR’s authorised CDC list suggests a lack of interest. Part of the slow progress lies in the sheer volume of work involved in setting up a single employer CDC scheme. It took years to get the RMCPP authorised, and the Communication Workers Union, who represented members in the switch, says there are still “some further areas that need resolving before the plan is launched and we continue to work with Royal Mail Group in our engagement with the government to ensure this happens as soon as possible”.
Muted appetite Steven Cameron, public affairs director at Aegon, says CDC may be the preserve of employers with the largest workforces, and more than likely those that are looking for an alternative to defined benefit (DB) provision. “I suspect that unless you’re a very, very large employer it’s unlikely that you would want to go down the CDC path,” he adds. “They would probably offer a DB scheme, and there aren’t many of those left in the private sector, so the demand [for CDC] is limited.” This view is shared by Clare Altman, managing director of individual retirement at Standard Life, part of Phoenix Group, who says employers are concerned about CDC’s complexity and how to manage employees’ expectations that the schemes provide guaranteed income. “We are aware that many employers do not see CDC as some- thing they want to engage in for understandable reasons. They have spent time and effort in ensuring auto-enrolment compli- ance and save for the most paternalistic of employers, there is no up-side to them of CDC.” Cameron adds that he has seen no evidence of public sector DB schemes considering a move to CDC either. “I’m not aware of that being something that is being discussed,” he says. Chintan Gandhi, partner and head of CDC at Aon, agrees there are thresholds that determine the viability of CDC. “CDC needs to be well scaled because it involves risk-sharing, and that means having several thousands of employees or
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