The future of pensions – Defined Benefit, Defined Contribution (or Collective Defined Contribution) model

For the housing sector, a move away from the Defined Benefit (DB) model  towards the Defined Contribution (DC) model continues. There is also another model being used for the first time by Royal Mail called Collective Defined Contribution (CDC) – although this is not yet approved for use by multi employers and is still a concept in development. The CDC model shares risks across members and generations in a different way to DB or DC, creating a different set of potential winners and losers.

The NHF is working with Isio to review the options available and keep its members informed of the direction of travel and opportunities available for individual or collective provision.

Improving outcomes in retirement

Choosing DC, for example, is just the start, and the actual benefit to colleagues will depend on other factors such as the contribution design (or, equivalently, anticipated level of outcome at retirement), the provider experience and the guidance package provided to colleagues around it.

The new Living Pension standard accreditation – of which Coastline Housing was recently one of the first employers to implement – looks to drive up outcomes in retirement for the lowest paid without necessarily increasing employer costs. This is an example of reshaping the DC contribution structure to improve inclusivity and achieve particular aims.

How technology and education will shape the future

Whatever the model and whatever the shape of contributions, how individuals engage with and understand their pension benefit is crucial.

We recently discussed how technology and education is going to shape the future of the pensions and savings industry, enabling financial confidence for employees. This is also covered in a full report.

Pensions as part of total reward

Pensions are ultimately a benefit for an organisation’s employees. Isio believes, therefore, that they are best designed, implemented and communicated in the context of total reward and wider benefits. Especially when there is choice involved, individuals increasingly have to weigh up where their money goes and how they are getting this back in benefit.

In the most effective organisations, there is no longer a pensions “silo” but pensions and benefits come together, with strategic thinking crossing over to people, finance and governance.

If you’d like to find out more, please use this form to get in touch with a member of the Isio team.

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Isio is one of the country’s leading independent pensions advisory firms, known and respected for its agility and the team has more than 1,000 client relationships. We're working with our pensions advisers Isio to keep the sector up to date on key areas affecting housing associations.

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Who to speak to

Adam Gravely, Finance Policy Officer