Work and Pensions Select Committed published it findings “Collective defined contribution pensions” the Committee’s 16th Report of Session 2018–19, on which we produced a bulletin. Following on from this the Department of Work and Pensions have now produced a consultation document delivering collective defined contribution pension schemes.
The DWP state that the benefits of CDC are as follows for members:
- provide a savings and income in retirement option within one package that is potentially attractive to those people uncomfortable making complex financial decisions at the point of retirement
- enable the sharing of longevity risk between members, thus providing each individual member with an element of longevity protection without the cost of accessing the insurance market
- may achieve greater scale than some non-pooled schemes and be able to invest at lower cost as a result – the recent emergence of master trusts in the individual defined contribution (DC) space has already shown some of the benefits of scale
- may allow the trustees to adopt an investment allocation which is tilted towards a higher proportion of higher return assets over the member’s lifetime than may be usual in an individual DC scheme, although the emergence of the draw-down market may see trends in the individual DC space follow a similar path over time.
- The consultation discusses the issues that have brought them to this point and reports that new primary and secondary legislation will be needed to provide an appropriate legislative and regulatory framework for CDC schemes.
The proposals are such that:
• CDC benefits will be a type of money purchase benefit so that employers have clarity about their liabilities to the scheme.
• ‘CDC schemes’ will be defined in legislation so that the Government can attach an appropriate regulatory and assurance regime to them.
The consultation goes on to discuss this in depth, with particular focus on the appropriate regulatory regime.
How to respond to this consultation
Online at https://getinvolved.dwp.gov.uk/pensions/ca5c7416/
In writing to:
Private Pensions and Arm’s Length Bodies
1st Floor, Caxton House
6-12 Tothill Street
By Email: firstname.lastname@example.org
Please note that this document was prepared by a third party and as such Brewin Dolphin is not responsible for the content or able to answer queries on the topics dealt with. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Therefore you should not rely on this information without seeking professional advice from a qualified tax adviser, who should also be able to assist you with any questions on the content.
This document was prepared as a general guide only and does not constitute tax or legal advice.