The Work and Pensions Committee has launched an inquiry into Collective Defined Contribution and Defined Ambition pensions. Contributor Tom McPhail, Head of policy – Hargreaves Lansdown.

Advocates of such schemes argue they can deliver some of the best attributes of both Defined Contribution and of Defined Benefit arrangements. Primary legislation created the framework for them in the Coalition’s 2015 Pension Schemes Act, however lack of support from the new Government following the 2015 General Election means no further work has been done on them for the past 2 years.

Hargreaves Lansdown comment Tom McPhail, Head of policy “Be wary of the hype; these schemes are essentially the same as the with-profits funds which have let down so many investors over the past 20 years.

There are a number of ways the UK’s pension system could be improved, such as increasing the amount people invest, making the tax rules simpler and fairer, and encouraging higher levels of engagement and personal ownership; it is not apparent that CDC schemes would resolve any of these issues. It is also fair to say that whatever their merits, these schemes do not sit easily in the current structure of the UK’s pension system.”

“As part of this inquiry, we’d also like the Committee to consider the option of giving workplace pension members the right to select their own pension provider, rather than being forced to accept whatever scheme their employer foists on them.”