Two-thirds (67 per cent) of pension professionals do not believe that collective defined contribution (CDC) will be a mainstream workplace pension offering within the next three years, according to a survey of delegates at TPT’s recent Pensions Pathways conference.

Meanwhile, a third (33 per cent) of survey respondents believed CDC schemes would be a mainstream workplace pension offering within three years.

Speaking at the event, Vidett head of trusteeship, Alison Hatcher, urged the delegates to be “open minded right now”.

“There are so many options. There's innovation, and we want to create a market where there is choice. The only way to do that is if everybody considers the choices available to them, and if we pre-empt or discount anything, then I think we're doing ourselves an injustice, and we're not taking advantage of the opportunity we have today that could greatly benefit members,” she stated.

Moderator, TPT chief client strategy officer, Andy O'Regan, queried whether it was the timeline of three years that had made the audience unsure and asked panellist First Bus head of pensions, Muntazir Hadadi, what could make employers want to set up or join a CDC arrangement.

“The biggest thing would be cost”, Hadadi stated.

“What I mean by that is, can you get the most bang for your buck, the most value for your employer? If I was to say I want to put more money into our DC scheme, more employer contributions, as it's going to help with improvement and retention. They are going to ask how much it is going to cost. For a company of our size, it is going to cost millions of pounds.

“And I'm sure what they would say to me is if we want to change the dial on recruitment and retention, I’m not going to spend the money on their pensions, I’m going to spend it on increasing the hourly rate or free coffee, something like that and that's going to shift the dial a lot more.

“So that's where the outcomes become so important”, Hadadi added.

Referring back to fellow speaker LCP partner, Laun Middleton’s, statement that CDC analysis suggests that it would outperform annuities and drawdown, Hadadi said: “If you get better outcomes for the same cost, that's quite an easy sell to put forward.

"You can say to employers, ‘do you want better outcomes for employers, it’s not going to cost you any more’.”

Hadadi predicted that the process of a board first considering CDC, assessing it and consulting with employees, through to approval and moving to a CDC scheme would take “at least a year” to achieve.

“There’s a journey with the board itself as well, to educate them on how [CDC] works,” he added.

Earlier this month, Royal Mail’s CDC scheme – the first in the UK – revealed a pension increase of 6.4 per cent in its first year of operation, according to its actuarial valuation.

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