Following Work and Pensions Secretary, Amber Rudd, welcoming plans for the Collective Defined Contribution (CDC) pension scheme to be introduced in the UK, with the scheme being ‘trialled’ at the Royal Mail first, please see below for a reactive statement from Jeff Bromage, Managing Director, Saga Money.
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“The new Collective Defined Contribution (CDC) pension scheme is obviously very successful in other markets, including Denmark and the Netherlands, and we hope it will bring savers in the UK the same low risk benefits and improved retirement planning. Pension transformations which suggest leading to a higher return on a lower risk investment, at face value, seem to be a good option to consider. As Defined Benefit schemes are slowly phased out and Defined Contribution schemes not being a suitable fit for everyone, the new CDC could be a solution for those currently left without the right option for them.
“It is encouraging to see that the government is continuing to strive to improve pension saving options, and we will always support new initiatives that increase financial security for savers. The gradual roll out and trial with the Royal Mail is an exciting and welcomed move, demonstrating the Government’s caution to ensure the scheme is suitable for the UK before implementing it more widely.”
“However, while innovative improvements are to be applauded, it is essential that these come hand-in-hand with suitable advice and support for savers. Like many reforms, on the surface they seem to be a no-brainer but there are often hidden impacts that savers need to consider before making any changes to their scheme. We recently found that a shocking 84% of people still do not know what pension freedom is, despite this initiative being launched nearly three years ago. This reform, while innovative at the time, still poses a huge risk for those withdrawing lump sums without full understanding of the long-term impact.
“Retirement, by its very nature, is hard to plan for and predict, but savers must consider all options available and seek professional advice before making changes to their saving plans. Everyone works hard throughout their lives to save enough for a comfortable retirement and we do not encourage changes to investment plans to be taken lightly nor without with the thorough due diligence that such changes require.”
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