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Editor’s comment of the week

How does the shift to collective defined-contribution schemes square with the Budget reforms allowing increased flexibility? 

As I understand it, in these collective schemes you do not have a share in the fund that you can measure in pounds and pence; the fund aims to pay a consistent level of income to all scheme members in retirement, past and future, and the cleverness of the actuaries will ensure that they can pay the same income whether the market is up or down. Now where have we heard that before?

I assume savers can ask for a transfer value but it will be like transferring out of a zombie with-profits fund or a defined-benefits scheme. The transfer value offered will not be close to the actual value of your ‘share’ in the scheme. 

Am I missing something? I would have thought the movement towards increased flexibility would have torpedoed this. 

In the Budget, the Government said: “People should take responsibility for their own pension incomes. Annuities are poor value.” But with this they seem to be saying the opposite: that people cannot manage their own pensions so they should give responsibility to a collective scheme over which they have no control and hope that at the end of it all they will get a decent annuity out of it.

Sascha Klauβ

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