Traditional Defined Contribution Systemic Failures – Are Collective Defined Contributions the Solution?

Traditional Defined Contribution Systemic Failures – Are Collective Defined Contributions the Solution?

By Gandy Gandidzanwa and Itai Mukadira

Many have asked, if Defined Benefit funds are an onerous financial burden to employers, and traditional Defined Contribution plans have consistently fallen short of the mark, is retirement funding doomed?

Our first paper this year, “4 Decades On – How Well has the Corporate Defined Contribution Pension Regime Fared?”, highlighted the systemic failures of the traditional Defined Contribution regime. We followed that up with a second part to it where we proffered some low hanging solutions to address some of the shortcomings of the system. That was then followed up with a focus on umbrella funds as an integral part of addressing the main challenges of the DC plans. Subsequent to that, we addressed some other structural issues of the industry. We were also on record, along the way, categorically saying, DBs, just like steam-powered locomotives, would not be coming back.

Now, as we come full circle, we bring with us the concept of Collective Defined Contribution systems, CDCs. Could they be the much-needed saviour?

Already growing in popularity in the Netherlands, Denmark, Sweden, and Canada – and very freshly minted into law in the UK, what exactly are CDCs?.. For the full article, click the link below…  Traditional Defined Contribution Systemic Failures – Are Collective Defined Contributions the Solution