Responses And Submissions

PPI response to the Department of Work and Pension’s (DWP) “Delivering Collective Defined Contribution Pension Schemes” consultation

PPI submitted a response to the Department of Work and Pension’s (DWP) “Delivering Collective Defined Contribution Pension Schemes” consultation in December 2018.

It explains that:

Designed effectively, Collective Defined Contribution (CDC) schemes could provide members with greater certainty and potentially higher retirement incomes compared to individual Defined Contribution (DC), while providing employers with greater certainty about costs and liabilities than Defined Benefit (DB).

• CDC has the potential to provide benefits for both members and employer sponsors compared to existing forms of pension provision
• Pension Policy Institute Modelling suggests that a CDC scheme can produce improved and less volatile replacement rates than an individual DC scheme, particularly if the scheme is mature and stable.

However, there are hurdles which must be overcome in design and operation if CDC schemes are to realise and deliver these benefits.

• Ensuring the fair distribution of risks between generations is a hurdle CDC scheme design will have to overcome
• Communicating the targeted nature of benefits to members will be a vital part of running any CDC scheme
• Establishing high levels of member trust will be an important component of CDC, although this is a challenge for any type of pension scheme...