Govt gives go-ahead for CDC schemes

The government has announced that it will be pushing ahead with the introduction of collective defined contribution (CDC) pension schemes to improve the retirement outcomes for both employees and employers.

Pensions Minister Guy Oppermen said today (18 March) that the plans will pool savers’ risks and give them more stability in retirement, in a move which could boost savings by up to 7 per cent.

The announcement follows a consultation by the government, in which it said that a “vast majority of the responses were “supportive of the proposals”.

Opperman said: “CDC schemes will provide employers with new options for managing their pension obligations, with benefits for workers and employers alike.

“As I said in the forward to the original consultation, CDC schemes are not a catch-all solution to concerns around retirement outcomes. But I am confident that well designed and run CDC schemes can offer advantages for some employers and employees in the UK.”

Opperman added that it will facilitate CDC provision “as soon as parliamentary time allows”. There is expected to be some follow up questions in the House of Commons this afternoon.

The initiative has been spearheaded by the Royal Mail, backed by the Communication Workers Union (CWU), after it drew up the plans for tis 140,000 employees, based on the “world leading” pension systems in the Netherlands and Denmark.

It added that once it has ironed out any issues with the Royal Mail trial, it will look to expand them CDCs to master trusts and multi-employer pension schemes.

Last month, Opperman said that the governments, Royal Mail and CWU had been working hard behind the scenes to make CDC a reality for the UK pensions landscape.

CDC is an issue that has divided opinion in the pensions industry over the past years, with many believing there is likely to be both “winners and losers” to the new proposals.

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