Chapter 6: ‘The Role of Collective Pension Schemes and How These Could Be Introduced in the UK’

“We Need a National Narrative: Building a Consensus around Retirement Income”, Report of the Independent Review of Retirement Income, 2016

49 Pages Posted: 10 Jul 2020

Date Written: March 1, 2016

Abstract

Supporters of collective defined contribution (CDC) pension schemes claim that they can produce higher and more stable incomes than individual defined contribution (IDC) pension schemes. Broadly speaking, there are two types of CDC scheme in existence: one that is a form of DB replacement and one that is a form of DC replacement. Because CDC schemes claim to have economies of scale that are not available to IDC schemes, we will examine whether this model for collective schemes can also boost incomes in retirement or at least make such incomes more stable across different cohorts of members. We will investigate how their performance might compare with standard IDC schemes. We will examine overseas examples of collective schemes that pool and share risks and hence make incomes in retirement more predictable (at least in principle). We will also consider what effect the new flexibilities for drawing down the pension pot in retirement have for the feasibility of a CDC pension. Finally, we examine an alternative type of collective scheme that might be more compatible with the new pension freedoms, namely collective individual DC (CIDC) schemes.

JEL Classification: G22

Suggested Citation

Blake, David P., Chapter 6: ‘The Role of Collective Pension Schemes and How These Could Be Introduced in the UK’ (March 1, 2016). “We Need a National Narrative: Building a Consensus around Retirement Income”, Report of the Independent Review of Retirement Income, 2016, Available at SSRN: https://ssrn.com/abstract=3618654 or http://dx.doi.org/10.2139/ssrn.3618654

David P. Blake (Contact Author)

City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZX
Great Britain
+44 (0) 20-7040-8600 (Phone)
+44 (0) 20-7040-8881 (Fax)

HOME PAGE: http://www.pensions-institute.org/

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