A risk too far

Royal Mail plans to offers its employees a Collective Defined Contribution (CDC) pensions scheme risk undermining recently-gained pensions freedoms. ‘A Risk Too Far’ also cautions against CDC schemes because of the system risks creating irreversible intergenerational injustice by overpaying pensioners at the expense of current and future employees, and there’s no commitment to put in place the necessary pre-funding to counter this risk. Furthermore, they have an unclear position within the UK’s regulatory framework. Current legislation does not provide enough clarity on multiple aspects of pensions administration – including what the risk allocation would be between employer and employee – leading to potential pitfalls if legislation did change in future or the fund ran in to difficulty.

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