• Commenting on the Consultation on a policy framework for broadening Collective Defined Contribution (CDC) provision, Claire Altman, Managing Director for Individual Retirement at Standard Life, said:

“CDC has attractive features for both employees and employers, providing a half-way house between defined contribution and defined benefit arrangements. Their structure could provide employees with greater income certainty in retirement when compared to DC - modelling suggests a 30% uplift on returns for the same level of risk, without employers taking on the significant costs associated with DB schemes.

“It’s great to see a consultation on the key issues underlying CDC adoption. If CDC takes off, it’s likely to be through commercial multi-employer schemes, given the costs and risks to individual employers of introducing their own scheme may be prohibitive for all but the largest companies. The consultation provides an opportunity to explore the feasibility of whole-life multi-employer schemes based on current frameworks and the challenges that come with this. Furthermore, it will also – importantly – explore the role of CDC in decumulation and whether there is significant appetite for CDC decumulation-only products.

“There will be important considerations for employers, particularly in relation to the complexity of CDC and managing employees’ expectation of guarantee. We look forward with interest to seeing the outcome of the consultation.”

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