Giles Watling, MP for Clacton, has welcomed the announcement that the Department for Work and Pensions will introduce the first Collective Defined Contribution (CDC) pension scheme in the UK.
There is a clear appetite for this change and CDCs offer a third type of pension scheme designed to give members more certainty in their retirement, while also offering a regular retirement income by allowing group contributions to be pooled together and invested to give members of the scheme a higher final benefit level. CDCs also mean much better long-term protections for members as the risk is shared, and millions of workers could eventually benefit from better retirement savings when this new type of pension scheme is introduced to the market.
The new schemes are expected to benefit and appeal to companies who want to offer strong pensions provisions to employees without having to hang on to enormous pension liabilities. And the Government has worked closely with Royal Mail and the Communication Workers Union to develop the proposals that went out to consultation in November. The Government will now legislate to allow Royal Mail to create the first CDC scheme, before allowing other schemes to follow once the scheme is fully tested and approved. This pilot scheme will benefit 201 Royal Mail employees in the Clacton constituency.
Protections will be built into the system to ensure fairness for both younger and older CDC pension scheme members, and Trustees of CDC schemes will be required to spell out the potential for fluctuations in pay-outs – depending on investment performance – to members at the outset.
This latest innovation builds on the success of automatic enrolment, which has brought more than 10 million people into workplace pensions since 2012, and the Government’s backing of industry to deliver pensions dashboards – capturing all someone’s retirement savings information in one place.
Work and Pensions Secretary Amber Rudd said:
“Introducing a completely new pension scheme to the market is yet another revolutionary reform in this Government’s quest to transform the retirement saving culture in this country.
“These pioneering proposals should deliver improved investment returns for workers and savers while cutting costs and red tape for British job creators. The new type of pension is currently used in Denmark and the Netherlands - two countries widely recognised as having among the best pension systems in the world.
“Any steps that result in better saving returns for workers are something to celebrate and I look forward to working with industry to enhance the prospects of millions of workers.”
Speaking about the announcement, Giles said:
“As the Secretary of State said in her announcement, anything that results in better returns for savers should be welcomed and celebrated, so I look forward to seeing this new scheme rolled out more widely. In the meantime, it is right to pilot the scheme and ensure any unforeseen issues are addressed. There is a clear desire for this change, so we need to get it right.”