Pensions minister Guy Opperman MP told the House of Commons yesterday that collective DC offers ‘interesting new possibilities’ that could transform the pensions landscape to the benefit of consumers.
Supporters of collective DC argue it has the potential to offer significantly improved outcomes to members, through reduced risk, lower transaction costs and improved investment performance. However, critics say collective DC risk penalising younger savers and its claimed improved returns are not certain.
Former pension minister Steve Webb promoted collective DC or ‘defined ambition’ pensions during his time in office prior to the 2015 General Election. The debate around collective DC has been given renewed impetus by the publicly declared desire of Royal Mail and the Communications Workers Union to set up a new arrangement for its workers.
A recent inquiry into the Work and Pensions Committee was strongly supportive of collective DC.
Opperman says: “Collective forms of pension saving offer interesting new possibilities, and the Department is currently working through proposals for the first Collective Defined Contribution schemes in the UK. We intend to launch a formal consultation in the autumn.
This is an ambitious programme of work, which has the potential to further transform the pensions landscape and benefit consumers.”
A Royal Mail spokesperson says:“We are pleased that the Government has announced that it intends to consult on enabling CDC pensions in the UK. This is an important step forward in enabling us to offer a CDC scheme for our 141,000 employees as soon as possible.
“As the provider of around one in every 190 jobs in the UK, Royal Mail is committed to delivering the best possible pension arrangements for our people. Royal Mail and the CWU hope the legislation required to enable CDC pensions will be introduced at the earliest opportunity.”
