A new multi-employer collective DC (CDC) provider has been established by Henry Tapper, chair of AgeWage and head of Pension PlayPen, and Goddard Perry Actuarial senior actuarial consultant Chris Bunford.
Called Pensions Mutual, the body, which has been registered with the FCA as a co-operative society, will operate on a not-for-profit basis, and plans to launch within a year. It plans to be in a position to approach the Pensions Regulator for authorisation by July.
The costs of the entity will be paid by charges on the first group of employers in the region of 0.5 per cent to 0.6 per cent, although it will operate dynamic pricing dependent on market returns and longevity of members and their partners.
The plan aims to deliver inflation-linked pensions paying up to 60 per cent more than a guaranteed annuity.
Pensions Mutual says its CDC arrangement will offer more stable and predictable income than income drawdown offerings, and will enable a more efficient investment strategy than current drawdown or annuity models by facilitating a 100 per cent allocation to returns-seeking assets up to retirement age – tapering this element down to zero by age 85.
The Pensions Mutual CDC scheme will convert every contribution received into an amount of pension with initially targeted CPI annual increases using unisex fair value actuarial factors. Each tranche of pension will be visible to members so that they can see how their pension income is growing.
Where employers switch existing DC arrangements to the scheme, transfer of existing pots will be at the request of members. Pensions Mutual says it sees a transfer to CDC from DC being a three-year project.
The provider says it has received significant interest from employers and unions, which it says support its mutual structure.
Tapper says: “The Pensions Regulator authorises the first unconnected multi-employer CDC schemes and we have not yet seen the final, adjusted CDC code. The door for authorisation opens on August 3rd and TPR has six months to say yes or no!
“We know that two organisations were making ready to launch such a CDC scheme – TPT and the Church of England—and now there are three. The third is a mutual—the Pensions Mutual—and it came into being at the start of March. Unlike the others it is dedicated solely to being the proprietor of a CDC for employers who want their pensions run as collective pensions with defined contributions. We are a CDC pension proprietor, starting afresh.
“The boards of the mutual and of the pension scheme are being established. We will announce our executive teams and also announce a board of trustees.
“Like others we will need to show ourselves competent and solvent, have a business plan, and have employers ready to work with us.
“So why do we believe we should become one of the few CDC schemes likely to be available to employers from the beginning of 2027?
“We think the answer lies in our title ‘Pensions Mutual. You become a mutual by registering with the FCA and agreeing to rules that ensure those who join the mutual benefit from it. We intend to distribute a significant proportion of the profits made by the CDC Scheme to the participating employers, rather like farmers who get paid by a co-operative dairy for the milk they bring to it over the year.”
