A brand new pension scheme could benefit millions of workers through increased retirement savings and enhanced security, a report has revealed.
The Department for Work and Pensions (DWP), which announced the new scheme this week, said the first Collective Defined Contribution (CDC) scheme has been developed in agreement with the pensions industry, insurers and other professional bodies.
Under the Government’s plans, the very first CDC scheme will be launched by Royal Mail and the Communication Workers Union (CWU). The Work and Pensions Secretary, Amber Rudd, said the new scheme will help members get more certainty in retirement by ensuring regular pay-outs, regardless of whether or not the employer is solvent.
This works by grouping a number of CDC pension scheme contributions together, giving members of the scheme a higher final benefit level.
The Government said the scheme also offers much better long-term protections for members because risk is shared.
Commenting on the announcement, Ms Rudd said: “These pioneering proposals should deliver improved investment returns for workers and savers while cutting costs and red tape for British job creators.
“The new type of pension is currently used in Denmark and the Netherlands – 2 countries widely recognised as having among the best pension systems in the world.
“Any steps that result in better saving returns for workers are something to celebrate and I look forward to working with industry to enhance the prospects of millions of workers.”
Royal Mail, which will be the first organisation to adopt the scheme after its existing pension scheme was deemed “simply unaffordable”, has welcomed the move.
“This is very welcome progress. Royal Mail and CWU have been campaigning together to bring about this legislation, building a cross-party alliance of supporters in both Houses of Parliament as well as working with government,” said Jon Millidge, Chief Risk and Governance Officer.
“We now look ahead to the next stage, and ultimately, delivering the UK’s first CDC pension.”