The case for collective defined contribution (CDC)
Status: This talk is in preparation - details may change
Status: This talk has been cancelled
On any sensible approach to the valuation of a DB scheme, ineliminable risk will remain that returns on a portfolio weighted towards return-seeking equities and property will fall significantly short of fully funding the DB pension promise. On the actuarial approach, this risk is deemed sufficiently low that it is reasonable and prudent to take in the case of an open scheme that will be cashflow positive for many decades. But if they deem the risk so low, shouldn’t scheme members who advocate such an approach be willing to put their money where their mouth is, by agreeing to bear at least some of this downside risk through a reduction in their pensions if returns are not good enough to achieve full funding? Some such conditionality would simply involve a return to the practices of DB pension schemes during their heyday three and more decades ago. The subsequent hardening of the pension promise has hastened the demise of DB. The target pensions of collective defined contribution (CDC) might provide a means of preserving the benefits of collective pensions, in a manner that is more cost effective for all than any form of defined benefit promise. In one form of CDC, the risks are collectively pooled across generations. In another form, they are collectively pooled only among the members of each age cohorts.
Date: 28 April 2020, 15:00 (Tuesday, 1st week, Trinity 2020)
Venue: Examination Schools, 75-81 High Street OX1 4BG
Venue Details: South School
Speaker: Professor Michael Otsuka (London School of Economics)
Organising department: Oxford Uehiro Centre for Practical Ethics
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Host: Professor Julian Savulescu (Oxford Uehiro Centre for Practical Ethics)
Part of: 2020 Annual Uehiro Lectures in Practical Ethics: How to pool risks across generations: the case for collective pensions
Booking required?: Required
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Cost: Free
Audience: Public
Editor: Rachel Gaminiratne