AMNT welcomes this consultation as it believes that the creation of the r-CDC pension scheme is highly important to millions of pensioners in the UK. However, because r-CDCs are new, confidence in the early stages would be strengthened if they were introduced as part of a guided retirement process or through agreements with existing scheme trustees. Additional reassurance for members could be provided by involving them directly in the governance arrangements of r-CDCs, particularly as employers will no longer have an ongoing stake.
As part of this process mechanisms should be introduced at outset to ensure that quotations are accurate and not misleading. “Since there are no guarantees in CDC any benefit illustrations need to be very carefully annotated with the assumptions used. Ideally a standard calculation method for future illustrations should be developed, perhaps to be used alongside some previous history data in comparison. The truth, the whole truth and nothing but the truth would be a good place to start!”, said John Flynn.
AMNT strongly supports the proposal that CDCs—albeit only in retirement—are made available to individuals whose pension accrual has been in DC schemes. These members stand to gain from the investment and longevity risk pooling that CDC provides, as well as from the reassurance of not having to manage their retirement funds personally throughout their later years.
However, although CDC will be a suitable option for many people, some individuals may prefer alternative approaches—whether to achieve complete certainty through an annuity or to pursue a bespoke solution for personal reasons. It is therefore important that enrolment into CDC includes the ability to opt out at the outset.
