The RSA – the UK’s royal society for arts, manufactures and commerce – has launched a pensions forum pushing for collective defined contribution (CDC) pensions.
Backed by pensions minister Guy Opperman and shadow pension minister, Matt Rodda, the forum’s intention is to help “bring together stakeholders to support the development and implementation of CDC”, the RSA said.
The CDC Pensions Forum is also being sponsored by AON, First Actuarial, Lane Clark & Peacock, CMS and the Institute and Faculty of Actuaries.
In a release, the RSA said that for most private sector workers “it is impossible to save for a pension which will deliver a reliable, cost effective income in retirement”.
CDC pensions – enabled by the Pension Schemes Act 2021 – offer a potential solution to this problem, RSA said.
The government is currently writing secondary legislation, which will allow individual employers to establish CDC pensions, and considering future developments for CDC pensions, it added.
The forum has been conducting research across the UK pensions community through an online poll and found “overwhelming support” for CDC pensions.
The survey suggested legislation for CDC should be quite open in terms of structures and expectations.
Protection of savers would therefore best be achieved by
- clear contingent rules on benefit entitlements which have been robustly stress tested;
- communication and transparency; and
- trustee-style governance.
“CDC is not a silver bullet that will solve all of the UK pension woes. No pension system is perfect, and CDC has limitations, and requires good regulation and governance,” the RSA said.
The key advantage of CDC pensions, however, the RSA noted, is that they are designed to give “an income for life in retirement” while remaining within a defined contribution framework.
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