How can Collective Defined Contribution Pensions schemes be implemented effectively?
The RSA’s Tomorrow’s Investor programme has campaigned for over ten years on the benefits to savers that CDC pensions could bring to the UK economy.
Following changes in the 2015 Pensions Act inspired by that campaign, the Royal Mail and The Communication Workers Union (CWU) have agreed to implement the first Collective Defined Contribution (CDC) pension scheme in the UK.
With this milestone, more evidence is now needed on how best to implement and regulate CDC schemes.
The RSA convened a forum of stakeholders from industry, regulators and the civil service to hear the views of the Minister for Pensions Guy Opperman MP on implementation issues.
This briefing paper is informed by that discussion, covering key implementation challenges and highlighting the need for policymakers, savers, and the industry to work together on a effective regulatory framework.
The government has recently announced its intention to enable the introduction of Collective Pensions in Britain. Over the past four years, the RSA has researched the advantages and pitfalls of Collective Pensions. It has advocated that these should be allowed in the UK, provided that there is an appropriate legal and regulatory framework. In this briefing note, the RSA sets out in simple terms how Target Pensions work, what are their advantages and their pitfalls - including how they provide a 33% better outcome than individual saving and result in more predictable returns. The RSA believes that now is the time to act and that British people should be allowed to save for retirement through collective pensions, just like people in Holland, Denmark, parts of the United States, Canada and Sweden.
Collective pensions provide a safer more predictable income in retirement. This report evaluates the performance of collective pensions and recommends they should become the standard in the UK.