RFP QUESTION 3.8
How we think about CDC
"Please describe your understanding of CDC pension schemes and the specific communication challenges they present, particularly in relation to variable benefits."
CDC requires a fundamentally different communications approach from either DB or DC — and most members won't arrive with the right mental model. The core challenge is building understanding of a scheme that pays a pension for life but where the level can change year on year, without creating false certainty or unnecessary alarm. Six specific challenges are set out below.
1 | Explaining 'target' benefits without creating false certainty
Many members bring expectations shaped by DB certainty or DC pot thinking. Effective CDC communications must use precise, consistent language that avoids implying guarantees.
They should clearly distinguish between designed outcomes and fixed entitlements, while repeatedly and consistently reinforcing that benefits can change over time. Without this discipline, members can feel misled when adjustments occur, even if communications have been technically accurate.
2 | Communicating annual adjustments downwards without causing alarm
Explaining that pensions can go down is inherently emotive, particularly for pensioner members. The challenge is to communicate in a way that is calm, factual and contextual.
This means normalising adjustments as an expected feature of the design, explaining why they are made and how they support long-term sustainability, and avoiding emotive reaction to single-year changes by reinforcing a long-term perspective. Poorly framed communications risk driving anxiety or disengagement even when the underlying scheme is sound.
3 | Building expectations consistently over time
CDC understanding cannot be delivered in a single communication. Expectations need to be set early (at joining), reinforced at key moments (statements, valuations, retirement) and consistent across all channels and formats.
Without this, members default back to DB or DC mental models, particularly when accessing digital tools or reading benefit statements.
4 | Balancing simplicity with actuarial accuracy
CDC communications must be technically robust — they operate under regulatory scrutiny and must be consistent with valuations and scheme rules. At the same time, excessive technical detail reduces understanding.
The challenge is to explain principles clearly without oversimplifying, use layered content that allows members to go deeper if they wish, and always lead with 'what this means for you'.
5 | Reinforcing trust in Trustee governance
Because CDC outcomes depend on Trustee oversight and decision-making, communications must build confidence in governance as well as the benefit design.
Members need to understand how and why decisions are made, that adjustments follow clear rules and independent valuations, and that the Trustee acts fairly across different groups of members and generations.
6 | Practical digital delivery challenges
CDC communications must also contend with the reality that members may expect to see an individual pot value that does not exist, and that portals are often designed around DB or DC assumptions.
Communications therefore need to manage expectations proactively and work across email, website, portal and statements in a consistent way.
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