PPI report: The role of Collective Defined Contribution in decumulation

This PPI modelling report, co-sponsored by the PLSA, explores how a decumulation-only Collective Defined Contribution (CDC) pension scheme may operate under the pensions regime in the UK.

Currently, employers can set up whole-life schemes, which include the accumulation phase, but a decumulation-only model could offer retirees the chance to buy into a longevity pooled retirement product with their DC pot.

On publication, Ruari Grant, Policy Lead: DC at the Pensions and Lifetime Savings Association, said; “The PLSA supports innovation in DC decumulation, so we are very pleased to be a Co-sponsor of this new report from the PPI on the key issues that arise when CDC is used in this way.

“By pooling longevity risk and investing in higher growth assets than guaranteed retirement products, CDC can offer retirees higher average lifelong incomes. However, while savers in a CDC won’t have to worry about running out of money, the year-to-year benefit level is less stable, particularly in a scheme with a more aggressive investment strategy.

“We do not yet have regulation in the UK enabling decumulation-only CDC schemes, so we will continue to work with government to establish a regime which sets high standards on areas such as member communications and scheme governance.”

Download the report from the PPI's website