TISA, the investments and savings alliance, has sounded a note of caution in its response to the DWP’s consultation on Collective Defined Contribution pension schemes (CDC).

Whilst acknowledging that CDC has the potential to be a positive addition to the Defined Contribution landscape, TISA warns that good governance and clear communications will be essential to avoid the risk of creating negative public perceptions about these schemes and pensions in general.

A particular area of concern for TISA are intergenerational issues as in the proposed model, scheme members of all ages accrue the same target pension entitlement, which means younger members are subsidising the older members.

Renny Biggins, TISA’s Retirement Policy Manager commented:

“The nature of CDC does mean there is an element of uncertainty surrounding accrual and retirement benefits which will not be understood by many. Additionally, the way in which these benefits are presented in the proposed model lends itself more to a Defined Benefit scheme communication, which may be perceived incorrectly by workers who are already struggling to understand retirement saving concepts.

“We believe it is therefore crucial that members are made fully aware that the target income is only a promise and this can fluctuate whilst still in accumulation or when they are receiving pension income. Nevertheless, if all aspects are positioned correctly, then CDC could become a positive addition to the Defined Contribution landscape, from which appropriate employers and employees could benefit.”

TISA’s response also highlights the need for the FCA to provide a comprehensive set of guidelines to assist IFAs in providing advice on transfers in and out of CDC schemes.

The full response is available here:

 

Ends….

Issued on behalf of TISA by Atlas Partners, for further information please contact:

Clara Rees Jones: telephone: 020 7183 7154 or 07523609413, email: clara.reesjones@atlas-partners.co.uk

Email: tisa@atlas-partners.co.uk

Notes for EditorsTISA is a unique, rapidly growing, consumer focused membership organisation. Our ambition is to improve the financial wellbeing of all UK consumers. We work with our members to deliver practical solutions and devise innovative, evidence-based strategic proposals for government, policy makers and regulators that address major consumer issues.

TISA membership is representative of all sectors of the financial services industry. We have over 200-member firms involved in the supply and distribution of savings, investment products and associated services, including the UK’s major investment managers, retail banks, online platforms, insurance companies, pension providers, distributors, building societies, wealth managers, third party administrators, Fintech businesses, financial consultants, financial advisers, industry infrastructure providers and stockbrokers.

Complementing our consumer policy development, TISA has become a major industry delivery organisation for consumer focused, digital industry infrastructure initiatives (TeX/STAR, Digital ID, MiFID II and Open Savings & Investment). This reflects TISA’s commitment to open standards and independent governance.

TISA’s current strategic policy and industry solution developments include making financial guidance more widely available; digitalisation including the development of a Digital ID, developing open standards-based projects that support the growth of Fintech and increase consumer access to financial services while lowering costs for providers; financial education for young people; retirement savings; consumer engagement; the TISA and KPMG Savings Index.

TISA also provides its members with support on a range of operational and technical issues targeted at improving infrastructure and processes, standards of good practice and the interpretation and implementation of new rules and regulations. This work currently includes: MiFID II, CASS, SM&CR and addressing cybercrime.