PPI response to WPSC's inquiry: Collective defined contribution pension schemes inquiry

Document type
Consultation
Corporate author(s)
Pensions Policy Institute
Publisher
Pensions Policy Institute
Date of publication
16 January 2019
Subject(s)
Social Policy, Older Adults, Poverty Alleviation Welfare Benefits and Financial Inclusion
Collection
Social welfare
Material type
Reports

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PPI submitted a response to the Work and Pension Select Committee's inquiry in to CDC in January 2018.

It explains that:

  • In 2014 the PPI were commissioned by the DWP to construct a model to attempt to replicate the Aon Hewitt work to help aid understanding of the potential benefits of CDC schemes.
  • In the long-term, once the modelled scheme is mature and the scheme population is stable, CDC produces better outcomes than DC. The PPI modelled CDC scheme also requires a relatively low contribution rate to maintain these outcomes.
  • In the short-term, with no initial pre-funding (which is likely to be the case for a new scheme), the benefits of the modelled CDC scheme can be underfunded. However, the CDC scheme does benefit compared to equivalent DC schemes in that it is less likely to run out of money during retirement so it can be considered to be more secure.

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