On the go: Only 13 per cent of trustees and sponsors predict that their organisations will adopt a collective defined contribution scheme of some sort by 2025, according to research by Willis Towers Watson.
In its consultation response published in March, the Department for Work and Pensions gave the green light for CDC schemes to join the market.
However, a poll of about 70 organisations by the consultancy showed that one in eight participants thought it was likely or very likely that their organisation would provide CDC benefits in the next six years, subject to the required legislation being passed.
Although the majority of those polled offer an individual defined contribution plan, 66 per cent would prefer to offer a pension providing a regular income throughout retirement, rather than a pensions pot that can be accessed flexibly.
The organisations expecting to provide CDC by 2025 currently have a variety of pension arrangements in place – defined benefit, DC or a combination of the two.
Willis Towers Watson said this suggests that initial appetite for CDC pension provision could come from employers with a range of current arrangements.
This means that, rather than appetite only coming from employers with a DB arrangement, or those who have committed to providing CDC when the required legislation is in place, there is also appetite coming from employers who already have some form of DC plan in place for at least a large proportion of staff.
Thirty-four pet cent of participants thought their pension scheme members would find it difficult to understand the nature and variability of CDC benefits.
In its consultation response earlier this year, the government said it was “extremely heartened” by the amount of responses calling for the legislation to be widened to provide for other CDC models, such as master trusts.
However, the government has made it clear that its initial priority is legislating for CDC schemes established by single or associated employers.
Fifty-eight participants in Willis Towers Watson’s poll thought master trusts would be the most suitable form of delivery for their organisation.
Simon Eagle, senior director in the company’s retirement business, said: “While only a minority of organisations are expecting to be part of the first wave of CDC benefit provision, our data shows that most organisations would like to provide their employees with a regular income in retirement rather than a flexible pensions pot.
“This suggests there may be further appetite for CDC provision in the longer term.”
