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Labour peer Lord Hutton pours cold water on CDC reforms

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.”


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

  1. Blimey, I’m agreeing with a Labour politician!!

  2. Julian Stevens 5th June 2014 at 10:40 am

    He may be right. Then again, an awful lot of small employers don’t want AE RB schemes either, certainly not within the over-engineered and restrictive framework concocted by the government. It would have been so much better if the government avoided all the unnecessary complexity by stipulating simply that employers must set up a scheme of their own choosing and contribute 5% of earnings to it for all those who elect to participate. Sure, some schemes would offer better or poorer value than others, but overall it would have been a much less troublesome method by which to get the ball rolling. True to form, civil servants just cannot see this.

  3. Simon Kershaw 5th June 2014 at 2:56 pm

    A Labour politician with brains. CDC schemes are just another way for the present generation of retires to steal from the next. Let’s face it, who would launch a brand new with profits fund with a no MVA guarantee. Back to school Mr Webb.

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