US and Dutch giants wooed to bring CDC to UK

Dutch DC scheme APG has £197bn of assets and 2.8m members

Concern at high annual management charges and historically low annuity rates has encouraged the overtures, combined with a poor public perception of the outcomes of individual defined contribution pensions.

Representatives of the US company TIAA-Cref, (Teachers Insurance and Annuity Association – College Retirement Equities Fund) visited London last week to meet with administrators, lawyers and politicians.

Separately, Dutch collective defined contribution plan APG is also exploring the UK market.

The move comes a month ahead of the Department for Work and Pensions’ consultation on CDC. It is hoped this will lead to regulation that will clear up the legal ambiguity on whether a CDC scheme provides a promise or an expectation to members.

Both TIAA Cref and APG have scale and experience of how to operate the profit-sharing aspect of communal pension funds.

The New York-based TIAA Cref has 3.7 million active and retired members, represents 15,000 employers and has $487bn (£299bn) in combined assets under management.

It has a low-cost communal ethos, its website describing its aim as “to help meet the financial needs of the individuals and institutions it serves on the best terms practicable, all without profit to the corporation and its stockholder”.

Its profits are distributed to policyholders in the form of dividends over the lifetime of their association with TIAA, or remain available for furthering what is described as its ‘mission’.

APG is the administration arm of ABP, one of Europe’s largest pension funds.

Based in Herleen in southern Netherlands, it has assets of e246bn (£197bn) and 2.8m members.

One of its motivations in either setting up in the UK or encouraging CDC here is that it needs allies in Europe against legislation from Brussels, which could harm its modus operandi.

David Pitt-Watson, who is spearheading a campaign by the Royal Society of Arts for cheaper, more effective DC pensions, and has been in dialogue with APG, said: “There is not yet any British institution, that is promoting CDC or any lookalike of CDC.

“That seems a pity, but if it is attracting interest from abroad then that would seem to be a good thing for Britain and Britain’s pensioners.”