The DWP has today published its response to the consultation on Collective DC pension schemes. Key features of the government’s response are:
- DWP will legislate at this stage only for a single employer model at this stage; even this will take years to go from primary legislation, secondary legislation (with further consultation) etc. into implementation even for Royal Mail; if the idea is to go further then going beyond one scheme running on a CDC basis could have to wait until the mid-2020s;
- DWP will not legislate at this stage for models with a ‘capital buffer’ which could help to smooth the ups and downs of investments; whilst this is not essential, it is quite restrictive not to allow at all at this stage for CDC schemes with buffers, which would be a feature of the very schemes in other countries that the Govt. is comparing with;
It seems likely that a large part of the government’s legal service has been diverted to work on Brexit-related legislation and therefore DWP has had to limit the comprehensiveness of the legislation that it can pass.
Steve Webb, Director of Policy at Royal London said:
“It is good that the Government is moving forward with CDC scheme as part of the pension landscape, but the proposed legislation will be very narrow in scope. Even for the Royal Mail it is likely to be several years before a scheme could be up and running. If others employers want to use a different model, this could need new primary legislation and we would probably be talking about the mid-2020s before further schemes could be in place. One of the key features of CDC schemes elsewhere in Europe is the presence of a capital ‘buffer’ to smooth the ups and downs of investments, and it is disappointing that the proposed legislation will not allow for this. I strongly suspect that the Government has very limited legal resources as civil servants are being diverted to work on Brexit-related legislation, and this is limiting their ability to produce more comprehensive legislation on CDC”.
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About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June.
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