Could CDC hatch from NEST?
Legislation paving the way for new-style collective pensions was one of several achievements in Steve Webb’s tenure as the Coalition government’s Pensions Minister.
Collective Defined Contribution (CDC) pensions are a mainstay of the Dutch pensions system and have been used in other countries such as Canada.
They offer a potential means of reforming the increasingly individualised UK pensions system by providing more efficient long-term investment in collective funds alongside longevity pooling to protect savers against living longer than expected.
The issue in the UK was how would they be used and who might take the risk of being the first to set up such a scheme.
There has been a growing weight of opinion among supporters of CDC that it could launch as a retirement income solution. Savers already have capital saved. But pensions freedom currently offers few options beyond taking cash or using expensive income drawdown products from insurers.
A blueprint for retirement income published by government-backed pensions provider NEST takes on this idea by exploring CDC as a means of providing a secure (but not guaranteed) income in the later stages of retirement.
I have written a blog for Pensions Insight today arguing that this could provide the catalyst that CDC needs.
WARNING: it contains an attempt at pensions humour.