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However, superior returns may only arise in very old age, according to research commissioned by the Association for British Insurers, an industry trade body.
Its model found that if a worker starts saving into a CDC scheme at the age of 30, by their 75th birthday they would have an income worth 51pc of their pre-retirement salary.
However, in a typical defined contribution scheme, this would stand at 55pc. They would have to survive to the age of 80 before the benefits of the hybrid scheme matched the income provided by mainstream pension pots in use today.
Yvonne Braun, of the ABI, said the Government was basing its projections on an “incomplete picture”.
“CDC schemes will not necessarily provide a better outcome compared to traditional defined contribution pensions,” she said. “There are many ways to deliver both security and flexibility, and no single product…will work or be appropriate for everyone.”
Robert Yuille, also of the ABI, added: “The Government has to avoid the temptation to hang everything on a single figure, as in the real world there will be different outcomes in CDC for different people, depending on their age and when they join the scheme.”
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