Dominic Lindley: They definitely offer potential advantage to consumers. If you explain a defined contribution scheme to consumers they regard it as chaotic. They regard it as investment which they see as like gambling. The more you explain it, the more uncertain they become. The No. 1 question that consumers have when then are enrolled in a pension scheme is, “Can you give me any certainty about what I might get at the end?” When they find out that you cannot give them any certainty they become disengaged. Collective defined contribution schemes undoubtedly have the potential to deliver more certain pensions but also to take away some of the complexity of decision making from consumers. The Bill is about giving people more freedom and that is very welcome, but we also need to recognise that there are some people who do not want to or cannot exercise that freedom. They want the kind of relationship that might exist between a doctor and a patient. They want the kind of relationship that might exist between a doctor and a patient. They want someone to act in their best interests and help them get the best possible pension.
In terms of take-up, one challenge will be to get these schemes to achieve significant scale. Where is the capital going to come from to back them? You need either big employer groups or the National Employment Savings Trust to be interested and offer these schemes, or you need some existing large defined-contribution schemes to want to convert to CDC. That is where the biggest uncertainty is. I absolutely support making them legal, but there is gong to have to be a very detailed strategy for getting the schemes off the ground and helping them achieve scale.