Collective individual defined contribution schemes may be the only viable form of collective pension scheme in the short run, according to David Blake, director at the Pensions Institute, Cass Business School.
In a submission to the Work and Pensions Committee inquiry on collective defined contribution pension schemes, Blake outlined three key features of CIDC schemes.
CIDC schemes keep individual accounts for all members in the accumulation phase, making it easier to value each saver’s pension pot, according to the academic.
The contribution rate, would be set to be actuarially fair to each member. Blake said a third advantage of CIDC would be the unique derisking investment strategy afforded to every individual in the run up to retirement.
“Such schemes would be compatible not only with the defined ambition agenda, they would also be compatible with the new pension flexibilities following the 2014 Budget, while, at the same time, exploiting economies of scale to the full and allowing a high degree of risk pooling,” he said.
