The largely debated collective defined contribution pension plan “does not fit” with the present day pensions landscape, it has been claimed.

Speaking at a Work and Pensions Select Committee meeting yesterday, 22 February 2018, Hargreaves Lansdown senior pension analyst Nathan Long stated that based on the firm’s research, “Hargreaves Lansdown doesn’t think CDC fits with freedom and choice and more modern day working practices”.

When asked by the Committee whether there is a risk that introducing another type of pension would create more confusion, Long explained that: “Retirement is very personal and people will have to make choices to suit their circumstances.” As a result of this, from a CDC perspective, he said, the scheme would need to “offer flexibility for people to take their lump sums and transfer out”.

“Currently people don’t understand diff between DB and DC, if we add a third that will be increasingly hard. We don’t think people will trust this [CDC],” he added.

Long referred to the complications and confusion that came with the recent introduction of the Tapered Annual Allowance, stating that even this change, that affects a small number of people, has brought “great complexity” and so implementing CDC could be even more problematic.

Nonetheless, also speaking at the Committee meeting First Actuarial senior actuary Hilary Salt opined that there is a considerable appetite for CDC in the pensions industry. “CDC will be beneficial for those in defined contribution schemes who are unable to see how it will provide a wage in retirement,” she said.

London Business School executive fellow David Pitt-Watson agreed that “the demand is there” for this type of scheme. In order to bring this to the market, he suggested that it would be logical to “start with the larger schemes” to assist with securing an income in retirement. Also “staging thinking about it [CDC] would be helpful,” he added.

Long agreed to an extent, stating that while the appetite for CDC may be there among larger companies, among employers with 2,000 employees or less there is “no appetite at all”.

Also commenting on this type of scheme, Barnet Waddingham senior consultant Malcolm McLean said on Twitter: “CDC has a lot going for it and may yet gain wider support”. However he identified two “potential problems”, these being: “(1) how it fits in with the new freedoms and (2) how consumers will view possibility of their pensions in payment having to be cut”.

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