However, they would take choice away from members and present additional risks so it is critical they are well designed and managed.
XPS Pensions Group believe there are three key areas the DWP and TPR need to consider in further detail to ensure the development of a successful CDC framework:
1. Sustainability and resilience of CDC schemes for the future
2. How to ensure fairness of outcomes between generations
3. Member understanding and expectation
Jacqui Woodward, Senior consultant at XPS Pensions Group says: “In our view it will be possible to develop an appropriate disclosure framework that adequately communicates CDC benefits to members. However, we would caution against underestimating the risks of CDC schemes in the rush to get them established. It is worth taking time to make sure that the new types of scheme can offer a genuine and safe alternative to members and we look forward to providing our input to further consultations on the detailed design of CDC arrangements.”
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