Strong rationale for government to support fullest possible rollout of CDC schemes – LCP

by | Mar 27, 2023

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In their response to the government’s CDC consultation, ‘Extending opportunities for Collective Defined Contribution Pension schemes’ which closes today, LCP strongly supports principles to extend schemes into multi-employer settings where large numbers of today’s savers can benefit.

Commenting, Steven Taylor, Partner at LCP, said “We support the scheme design proposals outlined in the CDC consultation, which align well with our wider industry discussions over the past year.  In principle we believe these mean only relatively minor legislative and regulatory changes are now needed to enable successful launch of a far broader set of CDC schemes with potential to benefit millions of today’s savers.  However there are potentially some additional complexities for “commercial” or “decumulation only” CDC schemes, which may require further regulatory consideration.

“There is strong rationale for government to support the fullest possible roll out of CDC schemes.  CDC aligns well with wider government objectives and for savers provide the genuine prospect of retirement outcomes better than DC, and with natural inflation-proofing.  For sponsors, schemes can sit within existing pension budgets and come with no risks of deficits.  In combination, this means that for large employers and groups seeking efficient ways to attract and retain the best staff, the potential is enormous.  

“In time, we agree that more commercially focussed schemes should be developed, with “decumulation only” arrangements a natural home for many millions of today’s savers who have only known DC.  We also believe there is a strong argument for the set up or appointment in due course of a default CDC scheme, perhaps similar to NEST for the DC world, which could also be available for decumulation purposes.”


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