CDC regulations published but 'job half done' says minister

[TrueBlueTerrier]

https://www.professionalpensions.com/ne ... 9-minister

The government has released draft regulations for the running of collective defined contribution (CDC) schemes and is calling for feedback and suggestions on its plans.

In a consultation published today (19 July) the government outlined its proposed regulations for CDC and the areas in which it is seeking industry feedback or assistance.

These are: scope and application, application process, authorisation criteria, valuation and benefit adjustment, supervision framework, publication and disclosure of information, and member protection and transfers.


The government said it was also seeking views on "associated consequential changes" that will implement the new authorisation and supervision regime for CDC under the Pension Schemes Act 2021.

It comes after pensions and financial inclusion minister Guy Opperman again signalled his support for single-employer CDC schemes earlier this month, saying they could provide a better retirement income to members.

A supervision regime for CDC schemes was introduced to ensure only well-run schemes are allowed to operate, such as those with clear strategy and resource to deal with arising issues, effective frameworks for member communications, and evident commitment to member protection.

CDC authorisation and ongoing supervision will be administered by The Pensions Regulator (TPR), which is expected to publish support and guidance for schemes, along with a Code of Practice.

The government has confirmed this code of practice will also be open for industry feedback in a separate consultation.

"I am pleased to present the next stage in the introduction of CDC schemes," Opperman said. "CDC schemes can only succeed if there is confidence in this new type of provision, and these regulations will help ensure that CDC schemes are set up and run well by providing clear criteria in which TPR will authorise and supervise these schemes."

He continued: "Interest [in CDC] is growing day by day as the legislative framework for CDC benefits becomes clear, and many employers, pension providers and unions can see the advantages it can bring. These draft regulations are a huge step towards fulfilling our commitment to legislation for single-employer and connected multi-employer schemes."

Opperman called the draft regulation release "a job half done", adding: "Many want to see non-connected multi-employer CDC schemes, master trusts and decumulation only CDC schemes."

While he confirmed the government's priority was on a full framework for single employers and connected multi-employer schemes for now, he said "interest is very welcome".

"I have no doubt collective provision can benefit million of pension scheme members when its full potential is realised," Opperman added. "Once this first step is done, we will turn our attention to the growing demand for these other types of provision."

The first CDC scheme is expected to be launched by Royal Mail following an agreement in 2018 with the Communication Workers Union that ended the potential for strike action over plans to move all members to a DC scheme in 2017.

EQ (Equiniti) last week confirmed it had been appointed as the administration software provider for Royal Mail's CDC plan, which the government will use as a blueprint.

The government today said it wants to "build on the experience of the Royal Mail scheme" before it seeks to "facilitate other forms of CDC provision".

Concerns on the horizon
Lane Clark & Peacock (LCP) has already raised doubts over the flexibility of the regulations around CDC today, warning that the government must ensure schemes are not locked into a one-size-fits-all model.

Principal Chris Bunford said: " While these regulations might facilitate the Royal Mail scheme, they are potentially restrictive in terms of the acceptable designs. Companies wanting to implement CDC schemes with different features to Royal Mail may find they have to wait for future regulations to give them a manageable pathway."

Aon head of CDC Chintan Gandhi agreed the regulations were a good "first sight" for any employers "looking to follow Royal Mail's lead".

He added that Opperman's support for multi-employer CDC schemes was "hugely positive".

"We urge the government to press ahead with drafting its proposed regulations covering multi-employer CDC schemes, and also those provided through commercial master trusts," he added.

Today's consultation will run for six weeks, closing on 31 August.

[JKSmudge]

Anyone else been on the DC scheme and not wanting to to CDC?

I intend to retire in 3-4 years and have a target for my DC holding by that time, ( I have pension from previous employer ) and I am happy with that as I know roughly what I will do.

CDC seems a lot of ifs buts and maybes... by the time the scheme is up and running I will have only 2-3 years CDC contributions. Seems pointless for thse of us close to retirement.

[RobertT]

There are also people in the RMPP who don't want CDC because they'll probably have to stop paying AVC's into Bonusplan & Flexiplan(not confirmed). Something that many people have planned to do until they leave RM.

Unless something changes, the plan is that we'll be able to transfer our share of the CDC pot over to a DC scheme, rather than take the pension, which is the logical choice for those who would rather stay in the RMDCP.

The general rule with company pension schemes is always join and pay in at least as much as it takes to get the maximum employer contributions. I don't really see why that would be any different with CDC.

Personally I don't expect to be in CDC for more than 18 months at the most, and it could be a lot less depending on when it actually starts and when I leave. But I fully intend to join, just to take advantage of the 13.6% contributions off RM and will then look seriously into transferring, rather than waiting until 67 to get a very small pension.

[robking]

Four years and 4 months 'til retirement. I will join the new pension scheme, it's mad not to, you get tax relief and employer contributions so you can't lose even if you were literally only in it for 1 month.

The proposal is that we can pay in an extra 1% which the employer will match, the quid pro quo for that though is that Bonusplan probably
will end for Section C members but I can see no reason for Royal Mail to end Flexiplan since they don't contribute to it.

If you feel that your CDC pension will be very small as mine will be, as I've no intention to stay an extra two years, then consider starting a SIPP - a self invested pension plan, from around £25pm, invest it in safe (ish) tracker funds or bond funds and when you retire you can transfer your CDC money into your SIPP.

This gives you the option of taking sums of money out whenever you want, 25% tax free, 75% taxable and leaving reminder invested, this is known as drawdown or you could buy an annuity to get a regular income if you prefer.

[RobertT]

Four years and 4 months 'til retirement. I will join the new pension scheme, it's mad not to, you get tax relief and employer contributions so you can't lose even if you were literally only in it for 1 month.

The proposal is that we can pay in an extra 1% which the employer will match, the quid pro quo for that though is that Bonusplan probably
will end for Section C members but I can see no reason for Royal Mail to end Flexiplan since they don't contribute to it.

If you feel that your CDC pension will be very small as mine will be, as I've no intention to stay an extra two years, then consider starting a SIPP - a self invested pension plan, from around £25pm, invest it in safe (ish) tracker funds or bond funds and when you retire you can transfer your CDC money into your SIPP.

This gives you the option of taking sums of money out whenever you want, 25% tax free, 75% taxable and leaving reminder invested, this is known as drawdown or you could buy an annuity to get a regular income if you prefer.

To be able to pay into Bonusplan and Flexiplan you currently have to be an active employee member of the RMPP and paying into the DBCBS, either section A, B, C or F.

CDC or the Royal Mail Collective Pension Plan(RMCPP) as I believe it's going to be called, is going to be completely separate from all current RM pension arrangements, with the RMPP effectively being a closed/deferred/preserved scheme. Therefore I think the logical outcome for AVC's is that we will no longer be able to pay into them.
But what you already have saved in them will still be used to fund the tax free cash when taking NRA60/65 benefits.

I have a personal pension which I mainly intend to use to fund retirement before I take any of my RMSPS/RMPP benefits, and agree that's it's a great way to proceed for anyone who's only going to be in the scheme for a short time, or who doesn't really trust the concept of CDC. As opting out is a very poor choice.
I do plan to at least look into transferring my CDC benefits, which would give my pre 60 pension a little boost.

What you describe as drawdown, isn't! It's a similar process called Uncrystalised Funds Pension Lump Sum(UFPLS).
Drawdown is when you take the full 25% of your balance as tax free cash upfront, with the remainder being withdrawn over time and classed as income.
More info here: https://www.hl.co.uk/news/articles/arch ... you-choose

[Aquarius]

Four years and 4 months 'til retirement. I will join the new pension scheme, it's mad not to, you get tax relief and employer contributions so you can't lose even if you were literally only in it for 1 month.

The proposal is that we can pay in an extra 1% which the employer will match, the quid pro quo for that though is that Bonusplan probably
will end for Section C members but I can see no reason for Royal Mail to end Flexiplan since they don't contribute to it.

If you feel that your CDC pension will be very small as mine will be, as I've no intention to stay an extra two years, then consider starting a SIPP - a self invested pension plan, from around £25pm, invest it in safe (ish) tracker funds or bond funds and when you retire you can transfer your CDC money into your SIPP.

This gives you the option of taking sums of money out whenever you want, 25% tax free, 75% taxable and leaving reminder invested, this is known as drawdown or you could buy an annuity to get a regular income if you prefer.

To be able to pay into Bonusplan and Flexiplan you currently have to be an active employee member of the RMPP and paying into the DBCBS, either section A, B, C or F.

CDC or the Royal Mail Collective Pension Plan(RMCPP) as I believe it's going to be called, is going to be completely separate from all current RM pension arrangements, with the RMPP effectively being a closed/deferred/preserved scheme. Therefore I think the logical outcome for AVC's is that we will no longer be able to pay into them.
But what you already have saved in them will still be used to fund the tax free cash when taking NRA60/65 benefits.

I have a personal pension which I mainly intend to use to fund retirement before I take any of my RMSPS/RMPP benefits, and agree that's it's a great way to proceed for anyone who's only going to be in the scheme for a short time, or who doesn't really trust the concept of CDC. As opting out is a very poor choice.
I do plan to at least look into transferring my CDC benefits, which would give my pre 60 pension a little boost.

What you describe as drawdown, isn't! It's a similar process called Uncrystalised Funds Pension Lump Sum(UFPLS).
Drawdown is when you take the full 25% of your balance as tax free cash upfront, with the remainder being withdrawn over time and classed as income.
More info here: https://www.hl.co.uk/news/articles/arch ... you-choose

Then surely they can close the current flexiplan scheme tied to RMPP and start a new flexiplan scheme when CDC starts - is there a reason they cannot do that ?
It will be a blow to thousands who pay into flexiplan and poor long term pension planning from RM and the union if that stops...and they will have a lot of disgruntled angry people as well.

[RobertT]

Then surely they can close the current flexiplan scheme tied to RMPP and start a new flexiplan scheme when CDC starts - is there a reason they cannot do that ?
It will be a blow to thousands who pay into flexiplan and poor long term pension planning from RM and the union if that stops...and they will have a lot of disgruntled angry people as well.

In theory I don't see why they can't introduce a similar scheme to Flexiplan to provide a bigger lump sum with CDC.

But the only thing that's been mentioned is the ability to pay in another 1%, matched by RM, into the lump sum element(the DBLSS).
And that hasn't been mentioned since the 4 Pillars agreement was signed off in early 2018, as far as I'm aware.