Fifth of companies are interested in CDC – DB & Derisking devices
The ACA 2021 Pension Trends Survey, which received 212 responses from employers covering 400 plans, found that 21 percent of them expressed interest in exploring the CDC for their own businesses, while more than half (54 percent) supported extending the CDC beyond the Royal Mail scheme, which is slated to be launched next year.
Support for expanding the reach of such programs is up 6 points from the same period last year, while the 21 percent who would consider bringing CDC into their own business increased by compared to 12 percent a year ago.
The latter figure rises to 25 percent if the multi-employer CDC becomes available, and a quarter would consider a CDC master trust for accumulation and disbursement, the ACA found.
The results come as contributions to traditional defined contribution plans have “stabilized” at a level insufficient to ensure a comfortable income in retirement. Defined benefit plans are also on the decline, with 5 percent of respondents saying they’ve taken steps in the past two years to downsize or close their plans for future accumulation, and 5 percent have made redemptions.
Patrick Bloomfield, Chairman of ACA, said: âThe level of corporate interest in CDC as a new form of retirement savings is very exciting. These results support the experience of ACA members, who work with many companies seeking to offer their employees a CDC system.
âIt underscores the desirability of making the CDC a central part of the UK’s future retirement landscape. It is wonderful to see the Royal Mail CDC program come to fruition.
âACA encourages the government and the pension regulator to build on this momentum and corporate enthusiasm,â he continued.
âCDC has the potential to energize other government policy initiatives, such as increasing pension plan investments in patient capital, illiquid and infrastructure. “
Chintan Gandhi, Chairman of the ACA Public Relations Committee and spokesperson for the ACA CDC, added: âWhile the understanding of the CDC has grown over the past few years, it is truly encouraging to see how quickly the real acceptance of the concept is developing. This reflects the growing awareness of its value in providing lifetime income in retirement on a fixed cost basis, and as a means of saving that does not involve having to make financial and financial decisions. complex investment.
âIn addition to the strong support shown for single-employer and multi-employer / industry-wide CDC plans, perhaps most exciting is the growing support for CDCs in the decumulation phase, where employers are clearly starting to consider the possibility of a possibility for their employees to purchase a CDC pension upon retirement, âhe continued.
âThis would be best delivered through commercial master trusts and, given that previous analyzes of the entire industry have revealed that CDC may be able to achieve approximately 30% better results than individual CDs where Annuities are used to purchase lifetime income in retirement, this would pave the way for millions of savers to access more profitable income for life in retirement.