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Can managed DCs save pensions?

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Trustees are hailing managed DC over CDC as the answer to the UK’s pensions problem.

Pitmans Trustees Limited (PTL), an independent trustee and governance services provider, has put forward Managed DC as the best solution for fixing the current pensions system in a recent breakfast briefing in London. Richard Butcher, Managing Director of PTL, argued: “Defined Contribution (DC) simply isn’t delivering. It is a simple product trying to do a very complex job. In part the problem is that it doesn’t reference the future or focus on an outcome. Instead it focuses on contributions and investments. These are important but its like looking at the steering wheel or pedals of a car instead of the road ahead as you drive. A crash is almost guaranteed.

The concept of Managed DC is all about getting people to focus on the outcome, the road. This can be done by asking three questions: How much do you want to earn in retirement? What margin of error are you prepared to accept? When do you want to retire? “If we leave DC as it is amongst other things we will have to educate 30m people to be able to make investment decisions. That won’t be easy!” Butcher added: “As part of good governance it’s vital we raise this debate. In fact there is a profound urgency because the impact of not taking action will affect us all, both professionally and personally, as it could lead to a generation of dissatisfied pensioners, which could then lead to disillusionment with the system and then its demise. The ultimate conclusion of such a process is social.

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