Why is Defined Contribution decumulation such a big issue for savers in the UK and what’s happening to tackle it?
In this session at IV24, Toby Nagle of the Financial Times spoke about the complexity of both Defined Benefit and Defined Contribution consolidation, citing potential benefits such as economies of scale and improved governance
There is a significant difference in employer contribution rates to defined benefit (DB) and defined contribution (DC) schemes continues, with about half of DB savers receiving employer contributions higher of 20% or more, compared to around a fifth of those in DC schemes
Jordi Skilbeck, Senior Policy Advisor, PLSA, gives the PLSA’s view on a potentially major shift in Defined Contribution pension policy
Key action items included the launch of the first collective defined contribution (CDC) scheme, consultation on extending CDC schemes to whole-life multiple employer schemes, and the establishment of a small pots delivery group to address the challenge of consolidating small pension pots
While this outcome is undoubtedly a success, there remains a value gap for some savers. Most defined contribution (DC) members are defaulted into their schemes and, consequently, engage very little with their providers
There are five core elements to the Australian system: it’s mandated, predominately defined contribution (DC), preserved until retirement, allows for choice, and there is life insurance within the pension. Key milestones and evolution In 1992 the Superannuation Guarantee was introduced with a mandatory 3% contribution rate (or 4% for employers with an annual payroll above A$1 million), requiring employers to contribute into a super fund on their employees’ behalf; over the years, the contribution rate has been ratcheted up to 11%
In preparation, we will be outlining our members’ expectations of any government regarding pensions by defining our vision for 2035 – more to come on this later in the year
I’m a trustee of a Defined Contribution master trust and in that context, although auto enrolment has been a fantastic success, there are issues around engagement and understanding. Many people don't appreciate that money comes out of their pay and becomes a pot. But as an open Defined Benefit scheme, the LGPS is different from DC
Many savers are opting to transfer out of their defined benefit (DB) pension scheme without understanding the risks involved
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