Commenting on the government’s response to the DWP’s consultation on Collective Defined Contribution (CDC) pension schemes, Kathryn Fleming, Partner, Hymans Robertson, said:

“It is great to see yet another step forward in realising the goal of CDC having a key role in improving the retirement outcomes of many current and future savers. As a pension industry where DC savers have just gone through a period of investment volatility, resulting in some of those close to retirement losing value on their DC savings and having to delay or change their retirement plans, the attractiveness of CDC and other simpler to deliver, innovative risk sharing solutions, is in demand.

“CDC is undoubtedly a game changer for the pensions industry, as for some it may realise these goals directly through the introduction of whole of life or decumulation only schemes. However, it is far from being the only answer. For others CDC may not be the right choice so there is a need for product innovation. Providers and the industry need to support the creation of alternative risk sharing solutions that help members extract more value from their pension savings.

“While CDC is a comprehensive approach to risk sharing as savers benefit from both investment and longevity risk being pooled, this results in it also being the most complicated. The challenge to be tackled with CDC will be the ability to implement them fairly and to get traction from Provider, employers and members. With increasingly alternative innovative approaches to risk sharing being considered, then next 12 months will be interesting to watch.”