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The government
should change pensions legislation to accommodate collective defined
contribution (CDC) schemes, according to Hewitt Associates.
The idea of CDC schemes has emerged from work that Hewitt has done
with the Department of Work and Pensions (DWP) as part of the Government’s
deregulatory review of pensions. The CDC scheme, although very like
a defined contribution (DC) pension, has benefits which aim to give
members a pension scheme like that of a defined benefit (DB) scheme.
Richard Mulcahy, principal consultant at Hewitt, said: “If
employers are to continue to provide occupational pension schemes,
they need the financial certainty that a defined contribution scheme
offers. However, employees are ill-equipped to take on the risk
and responsibilities of such schemes. Providing targeted defined
benefits from within a defined contribution wrapper is, therefore,
a logical compromise between these two conflicting realities –
and it’s this which makes a CDC scheme potentially attractive.”
The deregulation of pension schemes is currently under consultation
by the DWP, and views on the idea of CDC schemes as a means of encouraging
occupational pension provision are asked for by 28 August. The consultation
document can be found on the DWP
website.
- Pensions Age
July 2008
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