Influential Labour peer Lord Hutton has poured cold water on the Government’s collective defined-contribution scheme reforms.
Yesterday the Queen’s Speech confirmed plans to allow employees to contribute to Dutch-style CDC plans, where members’ contributions are pooled and the pension is paid from the collective fund.
Documents published alongside the speech say CDC schemes will “potentially allow for more stability around pension outcomes”, but experts have raised concerns about the level of investment returns they can deliver and intergenerational unfairness.
Speaking at the Money Marketing Retirement Planning Summit in Bedfordshire today, Hutton said: “I doubt very much whether there will be a return to risk sharing in the UK. I have not met a single employer who wants to take on more longevity risk. No employer is going to do that in my view.”
Hutton also questioned the value of retirement income guarantees.
He said: “I understand why our politicians want to talk about guarantees, because DC plans are inherently uncertain. But in my view, guarantees will be expensive to buy and will almost certainly be poor value for money.”