Collective Defined Contribution Schemes
The Pension Schemes Bill introduces an alternative pension scheme design to both Defined Benefit and Defined Contribution, known as Collective Money Purchase, and often referred to as Collective Defined Contribution ("CDC"). These are risk sharing (or target pension) plans widely used in several other countries including Canada and Holland, but not currently permitted in the UK.
Aon has conducted significant research into the CDC design which demonstrates that CDC plans can offer advantages of cost certainty to employers and better member outcomes than DC in terms of higher average pension incomes. In addition to this, CDC plans can provide members with a much better idea of their income in the run up to retirement than today's typical DC plan.
Details of our research are available in our White Paper 'The Case for Collective DC' which is available for download via the links on this page. We are interested in hearing your thoughts on how pension provision should evolve in the UK. We would also relish the opportunity to talk to you about our work in the CDC arena, get your input into the subject and continue to evolve our CDC template design.
If you would like to discuss any of the Government's proposals further, see further details of our research or would like more information, please speak to your usual consultant or one of the CDC team:
Please click here to download your copy of Aon's whitepaper outlining the case for Collective DC plans.
Collective DC - Mythbusters
When legislation to permit the operation of Collective Defined Contribution plans (CDC plans, also referred to as Target Pension plans) was implemented, there was a positive deluge of articles criticizing these plans - before they have even started!
This article sets out a compilation of the most common accusations against CDC plans - and sets out the truth of the matter. CDC plans offer the potential for better, more reliable pensions outcomes for many UK employees - for the sake of these employees, we will continue to argue in favour of CDC plans.
Click here to view the Top Ten Mythbusters
Stability and Fairness: our second whitepaper on collective DC
We are delighted to present our second paper analysing the potential for Collective Defined Contribution ("CDC") benefit plans to offer better member outcomes for retirement savings in the UK. Our first paper above analysed the basic feasibility of potential CDC plans running in a steady state, that is, with a steady population of members. In this paper, we expand significantly on that analysis to ask whether it is possible to design a CDC pension plan that can be grown from zero assets, survive membership shocks in the context of a bulk transfer into the plan, and close back down to zero assets. This is akin to the key questions to ask when buying something like a car: "Does it start, go and stop?
Please click here to download your copy of Aon's second whitepaper on Collective DC.
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