Investment risk-sharing is a fundamental part of whole-life collective defined contribution (CDC) pension schemes, such as the Royal Mail CDC.  But how does investment risk-sharing benefit members?  And does it favour some groups of members over others?  These are important questions as members bear the risk in the CDC scheme, yet do not make any decisions about the management of their money.

The benefit design of the CDC scheme has a large impact on the benefits paid to members and how it varies across members.  For example, whether to use a constant or age-related benefit accrual.  If an age-related benefit accrual is used, then how should the benefit accrued by each contribution be calculated - should it reflect current predictions of investment returns or a set of predictions which don't change over time?  

The results of an attribution analysis to understand the impact of the CDC scheme benefit design are presented, in a simplified CDC model.