The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) has created a cross-industry forum ahead of the government's consultation on Collective Defined Contribution (CDC) pensions.
The forum will aim to aid the on-going development of policy on CDC pensions and has launched a paper identifying three areas that should be considered by the government in their introduction.
It claims government legislation needs to be future-proofed, so that CDC pension sponsors can be assured it will be consistently applied.
The forum will also aim to ensure that schemes will be governed by trustees acting for the benefit of beneficiaries and has said the existing master trust regime could be adapted for CDC pensions.
Royal Mail is currently working with the Department for Work and Pensions (DWP) on the changes needed to introduce CDC schemes in the UK.
It has committed in principle to the future introduction of a CDC scheme for all Royal Mail employees, subject to the necessary legislation, and has said it will give the forum support.
The employer reached an agreement with the Communication Workers Union to set up a collective scheme for its employees amid the closure of its defined benefit (DB) pension fund on 31 March 2018.
The Pensions Policy Institute will also support the forum in an independent adviser capacity.
David Pitt-Watson, RSA fellow and chair of the CDC Forum, said: "CDC fills an important gap in UK pension provision. It allows people to save cost-effectively for an income which will last them throughout their retirement.
"CDC provides a higher income than an annuity and unlike a drawdown will last however long you live.
"But to be successful it needs proper regulation and governance – our forum will set out how to do exactly this, addressing some of the genuine concerns around implementing CDCs while clearing up some of the myths too."
CDC pension funds differ from defined contribution pensions as they invest savings in a large collective pot which provides an income in retirement, rather than producing individual pension pots.
Unlike defined benefit plans, CDCs do not guarantee a particular income in retirement and instead have a target amount will pay out based on a long term investment plan.
The government is set to launch its consultation on CDC schemes in the autumn, with Guy Opperman saying that the schemes would open up "interesting new possibilities".
CDCs are also scheduled to be discussed in Parliament on Wednesday (17 October), as part of a 10 minute rule motion from Conservative MP Paul Masterton.
FTAdviser reported in May there were several companies interested in setting up CDC schemes if the legislation was passed to allow this.
rosie.quigley@ft.com
