Going Dutch - Collective Defined Contribution Pensions – Improving UNISON members pensions

Motion to National Delegate Conference June 2019 by UNISON Housing Associations branch. 

Collective Defined Contribution Pension Scheme – Improving UNISON members pensions

"Conference congratulates the Communication Workers Union and Royal Mail on their groundbreaking agreement to pursue the creation of a collective defined contribution (CDC) pension scheme.

As well as being a model of constructive industrial relations, it opens the door for CDC to move from abstract idea to practical reality. This could transform the UK pension’s landscape outside of the public sector

Conference notes that since the introduction of Auto-Enrolment the number of workers saving for their retirement in defined contribution schemes are now greater those in a defined benefit scheme.

·         As of 2016 only 1.3 million workers were actively contributing to their DB scheme down from 3.7 million in 2005.

·         Defined contribution pension schemes outside the public sector had 7.7 million active members in 2017.

·         However there are increasing numbers of employers in the public sector bypassing the LGPS or the NHS schemes by transferring operations to arms length companies.

DC schemes do not deliver a pension; they are small investment pots for each member. All of the asset management fees and transactions are extracted from their investment pot. All the risk of the market value of assets falling is with the member.

Data published in April 2017 revealed that the average UK investment pot was £50,000. That pot of assets and cash is all members will have to survive on along with their state pension.

CDC pensions, which are prominent features of highly successful pensions systems in Denmark and the Netherlands, offer advantages in the middle ground between DC and DB.

These schemes offer a regular retirement income but in the form of a target benefit rather than a guarantee. Changes in the funding position of the scheme are addressed by adjusting the benefit rather than calling on extra contributions from the employer.

CDC may well appeal to employers who want to offer good pensions to their workforce where they have previously closed their DB scheme. The prospect of a regular and relatively reliable income in retirement will be welcomed by UNISON members who are now in a DC scheme.

As CDC schemes provide the opportunity for industry wide collective pension schemes conference therefore agrees to  

·         Continue to fight for a good quality Defined Benefit pension system and resist attempts by employers to close DB schemes.

·         Authorise consultation with members, branches, forums and service groups throughout the Energy, Water, Private Contractors and the Community and Voluntary sector so that they may place CDC on our bargaining agenda

Hat tip photo http://pensionpulse.blogspot.com/2014/10/going-dutch-on-pensions.html