Popular News
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Industry urged to probe pensioner spending habits
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Single pensioners need £225K more for ‘moderate’ retirement
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DC savers warned of 20% hit from Trump’s tariffs
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Number of appointed reps continues to fall
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1 in 5 pension savers mistrust financial adviser
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Latest Blog
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Martin Tilley: How education can tackle pension scams
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Lisa Webster: Maximising protected tax-free cash
While 2024 ended with a lot of doom and gloom in the pension world following the big announcement on inheritance tax (IHT), there was some good news that may have slipped under the radar of some advisers.
In November, the DWP detailed its plans for the new type of occupational pension scheme which will be subject to a 0.75% charge cap with the aim of keeping costs down. Royal Mail is already looking at introducing a CDC.
The government gave the green light last year for CDCs and plans to legislate for them in due course although critics have already warned it could take years for CDCs to arrive and they may risk fluctuating income for members in retirement because of their structure.
XPS says in its submission to the government on the proposal to introduce CDCs that they could provide “better outcomes” for employees than traditional DC schemes.
However, it said they may take choice away from members and present additional risks so it is “critical they are well designed and managed.”
XPS Pensions Group says there are three key areas the DWP and Pensions Regulator will need to consider to ensure the development of a successful CDC framework. These include:
1. Sustainability and resilience of CDC schemes for the future
2. How to ensure fairness of outcomes between generations
3. Member understanding and expectation
Consultation on CDCs ended last week.
Jacqui Woodward, senior consultant at XPS Pensions Group said: “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.”