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Tom Kean: CDCs look clever- that’s the problem

have always been very pleased to count myself as one of the contributing IFAs here at Money Marketing. I find the whole process of writing this column thoroughly enjoyable and more than a little cathartic.

However, I also feel quite a weight of responsibility, which sometimes makes writing certain pieces a little difficult. Just like on the TV and in the newspapers, good news does not really sell. But, equally, I do not want to appear too surly.

That said, I do not subscribe to the notion that I must write upbeat and positive stories all the time. Or ever, in fact. I cannot see the point in telling any of you how to run your businesses or how great something is; there are plenty of other opportunities elsewhere for that to happen. This is more about lobbying, as far as I am concerned. A chance to vent some frustration in a constructive way.

Tom Kean: Pensions dashboard has always been destined for disaster

So what I can do is point out when something feels wrong to me. I have been doing this for over 30 years in various guises and have worked on both sides of the fence, i.e. as a provider and as an IFA. In other words, I can see things from most angles, including that of the consumer, and reckon I have a good feel for how it all slots together. What is fair and what is not; what is likely to work and what is likely to come back to haunt us. The last time I wrote in these pagesspecifically about the pensions dashboard, it was clearly interpreted by some as negative and depressing, judging by the comments.

I am sorry if that was how it came across, as the whole point was to say how good it would be if it did work, but that we needed some proper joined-up thinking, which, as far as I can tell, has been hard to spot so far.

I also suggested it was anomalous that it was covering just pensions and am still not sure how anyone can argue against that point. I talk to enough people to know these are not crazy rants from some mad provincial adviser but, in fact, quite rational and widely held views.

Finally, I suggested collective defined contribution pension schemes were a bad idea that would only add to the miasma of consumer confusion, which will help precisely no one. Again, I cannot see where there is room for debate on this one. Ask anyone – and I mean literally anyone – and 100 per cent will say that pensions are too complex, shrouded in mystery and enjoy a pretty low level of respect, despite the valiant efforts of auto-enrolment.

John Lawson: DC or CDC? That is the question

So I will apologise up front if I offend anyone who has invested time, effort, expertise and money in CDCs, but I am (fairly) sure hardly anyone wants them.

I totally get that they might appear clever and innovative, but it is exactly those traits we need to put aside for the greater good of consumer engagement.

Change for the sake of it rarely makes sense – and heaven knows we all experience enough change in pensions anyway.

With that, I am afraid I stand by my view that this new style of pension is one step too far.

Tom Kean is director of Thameside Financial Planning

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Hmm – I can see at least 140,000 Royal Mail employees who do want CDC. Once the concept is proven, I can imagine many more will follow suit. CDC has the potential to be a durable post retirement solution, in a way that little else is in the market at present.

    • Royal Mail wanted something close to DB and have been told that CDC is the solution. Bear in mind that we still don’t have an agreed format, rules or regs, added to which we have to deal with the risk that CDC is not going to be automatically under retail investment disclosure rules. That is of major concern as it renders proper comparison with alternatives as difficult/impossible. Its time for the EB consultants to enter and engage with regulation so that the protections are in place, as is an adequate complaint structure.
      To promulgate the notion that 140,000 Royal Mail workers have actually have given informed consent is irresponsible in my opinion at this stage they are no different to Equitable Life Policyholders who have bought a strap-line but have no real concept of what, if anything, underpins it.

      I fully accept that Occupational DC and its lack of disclosure has many flaws as has some of the charging structures in individual plans for drawdown. However until we can see on a sheet of A4 a simple statement that confirms entitlement and risk the 140,000 you refer to have a wish list but the test will be when and if its delivered.

  2. Christopher Petrie 14th November 2018 at 1:39 pm

    Will CDC scheme holders need to pay thousands of pounds to use a Pension Transfer Specialist in order time use pension freedoms?

    Might be unpopular if no IFAs are prepared to transact the work due to FOS fears…..

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