Speaker: John Armstrong
Title: Collective Pensions in the UK
Abstract: The Pensions Scheme Act 2021 allowed the creation of a new type of pension scheme in the UK: collective defined contribution (CDC) schemes. In October 2024, the Royal Mail Collective Pension Plan (RMCPP) was launched, the first ever UK CDC scheme. This talk will examine the goals of collective pension schemes and will assess how successful CDC designs are in achieving this goal. We find that CDC schemes contain significant intergenerational unfairness and that the “flat accrual” design of RMCPP can even lead to a situation where investors are expected to receive an income that is worth less than their investment. We propose a simple alternative collective design based directly on principles of mutual insurance and show both theoretical and quantitative results on how this can be expected to outperform current CDC designs.