Pensions - Articles - Royal Mail and CWU agree the UKs first CDC pension scheme

 “Royal Mail and the CWU have identified a ground-breaking approach to pension provisions. Aon has long been an advocate of the collective defined contribution (CDC) scheme they have committed to, and we have lobbied hard for their introduction, building on our global experience of these plans.

 “CDC fills a gap in the market of current pension provision. Individual members do not bear all of the longevity, inflation and investment return risk as they would with a conventional DC scheme. Instead, demographic and financial risks are pooled across the membership. At the same time there is a fixed cost to the employer – none of the open ended commitment associated with DB schemes.

 “Members receive a lifetime income in retirement, paid directly from the scheme’s asset pool. This means members do not need to take on the risk of buying an individual income product, such as an annuity, where low rates at the point of retirement lead to a permanent impact in members’ retirement funds. They also do not need to make complex financial decisions if they do not wish to, unlike conventional DC pensions.”