What is a CDC pension?
For CDC pensions, employer and member contributions into the pension scheme are pooled, and this collective pot is then invested. CDC pension plans pay members an income in retirement, rather than members having to buy an insurance product (known as an annuity) or investing their money in another way.
While there is an expected level of benefit that the employee will receive in retirement, this is not guaranteed. The actual benefit payable will depend on the scheme’s investment performance and other factors such as average life expectancy of members. In the anticipated Royal Mail CDC pension scheme, the same annual increase/decrease will apply to all members, whether they are still saving for retirement, have left the scheme or are in receipt of their pension payments.
CDC pensions have fixed contribution rates from the employer and members. In Royal Mail’s anticipated CDC pension, the company would contribute 13.6 per cent of salary, with members contributing six per cent.