THE GOVERNMENT has confirmed its commitment to overhaul the retirement process and announced new plans to introduce collective defined contribution (CDC) in the Queen's Speech yesterday.
The government will introduce a Pensions Bill to give effect to the tax rule changes announced at the Budget, with the goal of giving people "greater freedom and choice over how to access their defined contribution pension savings", sister title Professional Pensions reports.
Alongside this, legislation will be introduced to allow CDC schemes to be set up under a separate framework from DC and defined benefit (DB) arrangements.
"My government's pension reforms will allow for innovation in the private pensions market to give greater control to employees," the Queen said.
The main aims of the bill are to: "Give individuals the freedom and choice to access their pension as they see fit, with the biggest change to the way people are able to access their pension in almost a century."
Individuals aged 55 or over with defined contribution pension savings will be able to withdraw these savings as they wish, subject to their marginal rate of income tax and scheme rules.
As a result of this legislation, over 300,000 individuals with some defined contribution pension wealth who retire every year would have full choice about how they access their pension savings.
The introduction of CDC rules is designed with the goal of "Enabling ‘collective schemes' that pool risk between members and potentially allow for greater stability around pension outcomes. It would also contain a number of measures relating to the valuation and reporting requirements for collective schemes".
A CDC scheme would see worker's savings pooled with those of thousands of others, rather than being run individually, and smooth the risk to employers of running multiple pensions.
Supporters of the move claim the lower costs associated with running funds collectively will mean retirees will receive larger incomes.
On plans for collective workplace pensions, pensions minister Steve Webb told the Sunday Telegraph last weekend that they give people "greater certainty and probably better value."
"There are some quite strong claims made for how much better it is. People say you will get a 30% bigger pension.
"You might, you might not, but clearly it is pretty unambiguous that you will get a more certain outcome and potentially a better one."
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