Retreat from CDC ‘strategic, tactical’, says UK's Altmann
Ros Altmann’s decision to halt any further work on collective defined contribution (CDC) was a “strategic and tactical decision” and one fully endorsed by the UK pensions minister’s predecessor.
Altmann, named pensions minister in May, said she had inherited “a rather large number of initiatives” but argued that her first priority was to communicate the reform of the state pension, which will transition to a single-tier, flat-rate system in 2016.
The Conservative party peer told the National Association of Pension Funds annual conference in Manchester that CDC or defined ambition would be future reforms, but that the changes were either coming too early “or quite a lot too late”.
“I don’t think it’s a priority for now,” she said, instead emphasising the need to look at state pension changes and auto-enrolment and communicating the changes allowing early access to pension savings.
“This isn’t abolished, this isn’t abandoned,” she said. “This is on hold for the moment because of all the other changes going on. I actually mean what I say, so please don’t read anything else into it.”
Altmann noted that, even if the Department for Work and Pensions went “full-pelt”, the regulatory underpinning needed for defined ambition and CDC – not drafted prior to the legislation passed in March – would not be in place until late 2018.
In a later speech Steve Webb, who until May was UK pensions minister and oversaw the work on defined ambition, backed Altmann’s priorities and said CDC was “always something for the long term”.
But he urged the industry not to let the Pensions Scheme Act 2015 simply “gather dust on the shelf” and argued a system should be ready to help when the appetite for risk-sharing returned.
“We have to be helping them, we ought to be planning ahead now, so that when the appetite comes back – not least from employers that find their workers can’t afford to retire because of the DC schemes they’ve been in – we’ve got a regulatory framework that isn’t cobbled together on the back of a [cigarette] packet, but has been thought through carefully over a period of years.”
Webb noted the National Employment Savings Trust (NEST) was considering greater risk-sharing for retired members, a proposal it outlined when discussing how its default strategy would change in the wake of the so-called pensions freedoms allowing members to draw down savings from age 55.
Altmann seemed to champion the quality standards for DC funds developed during Webb’s tenure, saying she wished to ensure the pension funds used for auto-enrolment were “good schemes”.
“I do also recognise,” she said, “that there are concerns about new master trusts setting up, and I want to make sure schemes that are promoting themselves for auto-enrolment are well run, looking after their members properly and sustainable.
“I don’t think doing nothing is an option.”
Her remarks follow on from those of Lesley Titcomb, chief executive of the Pensions Regulator, who raised the prospect of the master trust assurance framework’s being mandatory for any fund accepting members through auto-enrolment.