Aon says that responses to an online quiz launched in July this year revealed a strong interest in collective defined contribution (CDC) plans.
Aon launched the ‘Is CDC right for my scheme?’ quiz to provide UK employers and pension scheme trustees with information on how a CDC scheme might meet their future needs. The quiz, which received over 400 responses, asked users a series of questions such as whether they would prefer a guaranteed income or a potentially higher variable income.
The results show that more than half of those polled wanted the next stages of legislation to allow CDC to move forward, making it more accessible than a single-employer structure. Only 13 per cent of respondents thought there was no compelling reason to consider CDC at this time.
Aon partner and head of CDC Chintan Gandhi says: “Our quiz has revealed that the appetite for CDC has never been stronger and continues to grow. The Pension Schemes Act made CDC a reality, and employers are now beginning to consider how it can meet their future needs and enable them to make better decisions for their workforces.
“While understanding of CDC has developed over the past few years, it’s really encouraging to see how fast real acceptance of the concept is growing. This reflects an increasing awareness of its value in providing an income for life in retirement, on a fixed cost basis, and as a means of saving that doesn’t involve having to make complex financial and investment decisions.”
Gandhi added: “We have also seen a strong expression of interest in variations of CDC to help address employers’ and schemes’ specific needs. Among our respondents, 36 per cent saw the benefit in setting up a single-employer CDC scheme to support their workforce. Another 26 per cent would opt for a multi-employer CDC arrangement where, for example, they could benefit from being part of an industry-wide CDC scheme or one set up by a commercial master trust. A further 25 per cent of respondents saw the value of CDC in the pension decumulation phase – and particularly in exploring the possibility of an option for their employees to buy a CDC pension at retirement. This latter form of CDC would be best delivered through commercial master trusts.
“This level of interest and understanding of CDC is a testament to the incredible work done by the pensions industry to drive what is the biggest innovation to UK pensions in a generation – and Aon is proud to have been at the forefront of those efforts. There is clearly more work to be done, but we can be certain that there is real demand and momentum for the next phases. We remain excited by the positive impact CDC looks set to have on millions of pension savers in the UK.”