Are collective defined contributions the next best thing?

There might be something to be said about collective defined contributions schemes, although it’s still a foreign concept to South Africans. For a starter, their monetary outcomes could be almost 30% better than those of vanilla defined contribution schemes. 

According to a UK House of Commons research briefing in April, these types of schemes can be explained as ‘like a defined benefit scheme, the collective fund pays scheme members an income in retirement’. However, ‘unlike a defined benefit scheme, the employer does not guarantee the pensions paid to the scheme’. 

According to Colin Haines, Europe, the Middle East and Africa chief commercial officer at Aon Wealth Solutions, ‘collective defined contribution is just another way of doing defined contribution in South Africa. Defined contribution is now the prevalent way of retirement provision where contributions are paid into an account and individuals can choose investment strategies.’