View more on these topics

Govt to back controversial ‘collective’ schemes in Pensions Bill

Lord John Hutton has previously warned CDC schemes create a greater risk of intergenerational unfairness.

The Government will back the creation of controversial collective defined contribution schemes in the UK as ministers look to wrestle back the initiative on pension reform.

The decision to support CDC schemes – whereby members’ contributions are pooled and the pension is paid from the collective fund – comes less than a week after pensions minister Steve Webb confirmed plans to introduce a cap on workplace pension charges in April 2014 had been delayed by at least a year.

According to The Times, measures to encourage the adoption of CDC schemes by UK employers, which would likely require changes to legislation, will be included as the “centrepiece” of a Pensions Bill before the general election in May 2015.

A report by the Royal Society of Arts, published last November, suggested introducing CDC schemes in the UK could boost retirement incomes by 33 per cent compared with individual DC.

But former Labour work and pensions secretary Lord John Hutton has warned CDC schemes create a greater risk of intergenerational unfairness, make it difficult for members to assess their exposure to risk and fail to account for individual circumstances. He also said the benefits of scale have been “exaggerated”.

Writing for Money Marketing online, independent pensions consultant John Ralfe described CDC as a “con” because it persuades individuals they are not taking on significant investment risk.

Syndaxi Chartered Financial Planners managing director Robert Reid says: “There are risks with CDC and the Government will have to be very careful it does not over-promise and under-deliver.”


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm