Rise of robust Collective DC for the UK

June 2014
Cardano, the leading investment adviser and fiduciary manager, today came out in support of the greater attention to collective DC regulation proposed in the 2014 Pension Schemes Bill that was laid before parliament last week, believing that members will reap the benefits of a stronger framework. 

Stefan Lundbergh, Head of Innovation at Cardano said: “It is extremely encouraging that there will be, going forward, enabling legislation for both the Collective DC and the Pension Income Builder. The ability to implement collective solutions in a Regulatory Own Fund makes it possible to develop pension solutions that focus on income stability and pooling of individual longevity risk. To protect the consumer and limit the probability of potential mis-selling scandals, it is quite right that there must be a robust regulatory regime enforced by a regulator with appropriate mandate and tools. 

“We would specifically emphasise the importance of internal accounting based on arbitrage free valuation methods, as well as clear ownership rights of collective surpluses. We would also suggest it is vital that there are predefined rules on what will happen in case of ‘underfunding.” 

Lundbergh continued: “Clearly it will be difficult to reach economies of scale when setting up new collective solutions as it relies on identifying a launching client collective. A transparent and streamlined licencing process around the Regulatory Own Funds would help by removing one entry barrier.”

Release date 27 June 2014