A small step forward for CDC
Jonathan Stapleton says the DWP's progress on CDC is a welcome, and cautious, step forward.
Slowly, but surely, progress is being made on collective defined contribution (CDC) provision.
Yesterday, the Department for Work and Pensions (DWP) said it would introduce CDC slowly, starting specifically with a Royal Mail scheme before being rolling it out more widely.
In its consultation response, the government department noted this was a "very complex area of legislation" and that "we need to be sure that we have the detail right for the Royal Mail scheme before we extend the provision to other, arguably riskier, models".
Secretary of state for work and pensions Amber Rudd said introducing a completely new pension scheme to the market was a "revolutionary reform in this government's quest to transform the retirement saving culture".
But such a transformation will take time - even legislation to introduce the more limited CDC proposals needed for a Royal Mail scheme will only be brought forward "when parliamentary time allows", meaning it could be, as Sir Steve Webb says, several years before the plan is up and running.
A more comprehensive CDC model for other employers could take much longer - and it is likely it wouldn't be in place until at least the middle of the 2020s.
But this isn't necessarily a bad thing as there are still quite a number of questions that have been left unanswered - including how such schemes will be taxed and how CDC schemes will qualify for auto-enrolment.
It is a good thing that the government has made progress on CDC for Royal Mail and has also left the door open for the development of alternative forms of CDC that will have a wider application.
But, as the government says, this legislation is complex. It is better it takes the time necessary to make sure it gets it right.
Jonathan Stapleton is editor of Professional Pensions
Follow him on Twitter at: https://twitter.com/jonstapleton
Join him on Linked in at: https://www.linkedin.com/in/jonathanstapleton/
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