Three quarters (75 per cent) of pension professionals think decumulation-only collective defined contribution (CDC) should be an option to members at retirement, a poll at the PLSA Annual Conference 2023 has revealed.

The survey also found that while 23 per cent of respondents disagreed that decumulation should be an option for members at retirement, 3 per cent thought that they should be defaulted into it.

Department for Work and Pensions (DWP) head of policy collective defined contribution (CDC) and DC decumulation, Julian Barker, said that he was “really pleased” by the results, but not surprised, especially given the tone of the discussions that have recently come up on CDC.

“Four years ago we probably would have got a very different result, and I think that’s a testament to the work we've done in government," he continued.

"But more importantly it's a testament to the work that's been done in the pensions industry looking at the possibilities of pooling longevity and investment risk and providing members with the potential to have a product that sees them through their life course, without having to make decisions unless they unless they want to and it's suitable for them to do so."

Speaking during a separate session, WTW UK head of retirement, Rash Bhabra, also highlighted the potential benefits of decumulation CDC, arguing however, that a faster pace is needed to drive this work forward.

“Where the government isn't moving as quickly as we would like is on decumulation CDC," he continued. "We are passionate about CDC as a whole… but whole life CDC is only going to benefit a limited number of organisations and individuals.

"Decumulation-only CDC has the potential to reach lots more people and benefit lots more people.

"That's the big prize, so we wish the government would move quicker to bring decumulation CDC to life," he added, raising concerns over the current alternatives available to members.

However, Barker acknowledged that CDC will not be the solution for everybody, clarifying that “there should be those choices around it”.

This was echoed by Standard Life head of master trust, Donna Walsh, who acknowledged that “decumulation CDC can come with potential risks and challenges which we need to work through".

"There will be an alternative put on the table as to how you can look to deliver reliable income, while managing the longevity risk, achieving growth and including flexibility," she continued.

"So I think so it could have a place, but there are alternative solutions that providers could also take to market in this space."

Adding to this, Barker also suggested that if the introduction of decumulation-only CDC also prompts innovation and greater alternatives that work better for some people, that is also a "very, very good thing".

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