Responding to the new CDC consultation that has been published today, Steven Taylor, LCP Partner, said: “Today’s CDC consultation follows detailed technical discussion with industry over the past year around how to best make CDCs work for multi-employer schemes.

“It is hoped that this will now fast-forward the emergence of a new brand of pension that can provide today’s employees with better expected outcomes than traditional defined contribution schemes.  In today’s climate the ability of CDC schemes to target full inflation protection could also be a key selling point for members, whilst employers will be attracted by immunisation from future deficits. 

“Squaring this circle to ensure good member outcomes means CDC schemes need to invest heavily in equities and other growth areas.  This aligns will with the Government’s wider objectives, but also makes investment strategy a key focus for scheme designs.  There is much to admire here and it is hoped that over coming months the consultation progresses smoothly. 

“Central to this will be evolving thinking around “decumulation only” models.  Once operational, these schemes could be very attractive to the current generation of private sector savers who have only ever known DC schemes, especially if , as hoped, they can offer significantly higher starting pensions than traditional annuities.“