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By Shealeigh Voitl

Much has been said about how broken the music streaming structure is for artists. Music insiders have long criticized services for their lack of transparency and disregard for songwriters and performers. Just last week, Music Business Worldwide reported that Spotify plans to slash its already meager royalty rates for its lowest-streaming artists.

In 2015, singer-songwriter Joanna Newsom, whose music has never appeared on the platform, called Spotify a “villainous cabal of major labels” that was “built from the ground up as a way to circumvent the idea of paying their artists.”

Apple Music, Spotify’s biggest rival, has made some improvements, increasing their payout to roughly a penny per stream. But most artists today won’t be able to make a “sustainable living out of (releasing) music,” Mark Mulligan, an analyst at Midia Research told the Guardian in 2021. “Streaming only adds up when you have billions, not millions, of streams,” Mulligan explained. Put simply, streaming benefits major record labels and superstars; others are often forced to forge a different path.

So, what’s different about Bandcamp, the online record store and distribution platform based out of Oakland, California? For one, Bandcamp allows artists and labels to upload their music directly to the site and set their prices for digital and physical products, with Bandcamp taking a 10-15 percent cut of the sales. Listeners can stream via Bandcamp, but can typically only enjoy unlimited streaming if they purchase the music.

On Bandcamp Fridays, which the company began at the start of the pandemic to help artists make up for a loss of touring income, the site waives its usual revenue share, allowing fans to directly support artists and labels once every month, with 82 percent of proceeds going to the artist/label any other time you buy from Bandcamp.

So, where Spotify and others may fail to adequately value art and the artists who create it, Bandcamp gives fans the opportunity to invest in the music and performers they love. Bandcamp also launched its online music publication, Bandcamp Daily, in 2016 for its robust music community, frequently featuring independent, relatively unknown artists and eclectic and experimental sounds from all over the world.

Instead of positioning itself as a mainstream cultural influencer, as Pitchfork has done increasingly since being bought by Condé Nast in 2015, Bandcamp has remained focused on providing a platform for independent and emerging artists to connect directly with their audiences and maintain artistic authenticity.

After Epic Games, the video game and software developer behind games such as Fortnite, bought Bandcamp in 2022, long-time Bandcamp enthusiasts wondered how the acquisition would ultimately transform the platform. A year later, Bandcamp workers formed a union known as Bandcamp United, composed of engineers, writers, project managers, designers, and support staff, who sought to address historical disparities in pay and access to paid time off, among other issues.

Less than two years after the Epic Games sale, Songtradr, a B2B music licensing service, acquired Bandcamp, and workers were sent into freefall. This month, Songtradr laid off about half of Bandcamp’s staff, including three of six editorial staff at Bandcamp Daily and forty members of Bandcamp United’s sixty-seven-person bargaining committee.

JJ Skolnik, a former senior editor at Bandcamp Daily, tweeted, “officially laid off, after two weeks of limbo where I expected that would be the case but had no confirmation. nearly eight years at bandcamp and it’s over.”

Bandcamp United also announced this week that Black workers were disproportionately affected by the layoffs, with only four of Bandcamp’s nineteen Black employees receiving job offers after the Songtradr deal.

When asked by Pitchfork if Bandcamp’s “artist revenue shares, user experience, or the editorial platform Bandcamp Daily will be affected by the acquisition,” Songtradr declined to comment. The following week, Songtradr CEO Paul Wiltshire told Billboard, “We think Bandcamp is a great platform as it is. There’s not a need to change it into anything other than what it is.”

But Skolnik shared in late October that the cuts hurt not only those who have been laid off but also make it much harder for remaining staff to do their jobs. So, now, what happens to Bandcamp Daily and its essential, unparalleled voice in underground music? What becomes of Bandcamp?

Trusting Songtradr’s word of “business as usual” seems futile after the layoffs. The landscape of music journalism has shifted a lot in the last decade, emphasizing, as NPR music critic Ann Powers put it in 2021, “pop’s 1 per cent (sic) to the extreme.” So, to contemplate the loss or distortion of something like Bandcamp Daily, which has been a lifeline to thousands of independent artists who make music for the love of music, is crushing. 

Bandcamp has long been a haven for artists who reject the music business’s exploitative practices or have otherwise been marginalized by the corporate ethos that permeates nearly every aspect of the industry.

As that industry continues to grapple with issues of transparency, artist compensation, and creative authenticity, the fate of Bandcamp serves as a pernicious reminder of the ongoing struggle to preserve the voices of underground music and independent artists and those who listen with keen appreciation.

Shealeigh Voitl is Project Censored’s Digital and Print Editor. A regular contributor to the Project’s yearbook series, her writing has been featured in State of the Free Press 2023, Truthout, The Progressive, and Ms. Magazine.

Mutual-fund-to-ETF conversions have become a way for asset managers to refashion investment offerings for investors, but they can be lengthy and arduous processes, a new study has found.

Operational risks, such as constraints and logistical issues, pose challenges to asset managers looking to convert mutual funds, according to the recently released 2025 Investment Management Outlook from Deloitte.

These obstacles include brokerage account requirements, distribution channel arrangements and issues relating to managing fractional shares, the report stated.

There has been a total of 119 conversions, according to data from Morningstar.

This article was previously published by Ignites, a title owned by the FT Group.

The first one, led by Guinness Atkinson in 2021, was initially viewed as a revolutionary development that would galvanise the industry’s move towards ETFs and away from mutual funds, said Alex Alberstadt, counsel in the investment management group for Seward & Kissel, LLP, who worked on the conversion.

“At the time, they were looked at as a clean process. It felt like there were not all these bells and whistles and extra layers of costs,” Alberstadt said.

However, “there are operational issues that everybody has to be up front about, and when you plan a conversion, you have to manage through these issues,” she said.

More than $60bn in assets have been converted from mutual funds into ETFs, according to the Deloitte report.

Firms such as Dimensional Fund Advisors, Fidelity and JPMorgan dominated the flows across the conversions through April, Morningstar data shows.

A spokesperson for DFA declined to comment when reached.

Fidelity has recently filed to convert two municipal bond funds into ETFs next year, according to regulatory filings. Once the conversions are finalised, Fidelity will have completed 14 in total, according to Morningstar data.

“Fidelity believes the conversions will provide multiple benefits for investors of the fund, including lower expenses, additional trading flexibility and increased portfolio holdings transparency,” the manager said in a Q&A on the conversions published on its website last week.

A spokesperson for the manager did not respond to a request for comment on operational hurdles it has faced in the conversion process.

But analysts agree with Deloitte’s findings.

“There’s a lot of work in the background that goes into making these conversions go smoothly . . . If you’re going to do it, it has to be done right so that your clients have a simple experience,” said Dan Sotiroff, a Morningstar analyst.

“Conversion is usually for smaller funds and can be a distribution strategy as much as it is a marketing strategy. Companies can use them as a way to get flows, but that doesn’t necessarily pan out,” Sotiroff said.

As of September 30, year-to-date net flows into the mutual funds converted into ETFs stood at roughly $11.2bn in assets, according to Morningstar data.

And because clients need access to brokerage accounts to hold ETFs, conversions can be issues for firms whose clients do not use them. They can include clients’ holding 401(k) plans that do not typically use ETFs, according to Sotiroff.

“At a high level, you have to make sure your clients can actually hold the ETF — and that’s just the start,” Sotiroff said.

Fractional shares also present issues, because they are available for mutual funds but not for ETFs.

Mutual fund fractional shares must be redeemed at the net asset value of the strategy during a fund conversion, but timing is a factor, Alberstadt said.

Because ETFs do not issue fractional shares, mutual fund shareholders who want to redeem before a conversion may incur additional taxes when those shares are sold.

That information must be communicated to clients and service providers in a succinct manner, Alberstadt said.

“The issues on fractional shares all have to be planned out. There’s multiple intermediaries at the table, and it requires resources and attention,” she explained.

Firms must post a transaction review and ensure that the process was managed properly, she said.

Some of the operational challenges of conversions could be mitigated by regulatory approval of the dual-share class fund structure that was long-patented by Vanguard, Alberstadt and Sotiroff both said.

An ETF share class option would be a favourable alternative to conversions, Karin Risi, a Vanguard managing director of the firm’s strategy, product, marketing and communications, said during a panel discussion at the Financial Times Future of Asset Management conference held in New York.

The conference was co-sponsored by Ignites.

“In the instance where you have the multiple share class opportunity, you don’t need to go through the much more cumbersome and operationally intense process of converting a mutual fund,” Risi said. “Adding an ETF share class onto a fund is a cleaner process.”

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com.

Good morning and welcome to your Morning Briefing for Friday 11 October 2024. To get this in your inbox every morning click here.

Business owners fast-tracking exits over CGT concerns

UK business owners have fast-tracked their exit plans over the past 12 months, according to new research from Evelyn Partners.

Nearly one in three (29%) have accelerated business exits in the past year, amid rumours CGT rates could take centre stage in the upcoming Budget.

This is an uplift on the 23% who said 18 months ago that they had brought forward business exits over the previous year.

The research found nearly a third (23%) of the 500 business owners with turnovers of upwards of £5m surveyed by Evelyn Partners who had fast-tracked their exits in the last year had done so because of worries about an increase in CGT.

Is a shrinking protection market bad for competition?

The UK protection market is lucrative but cut-throat as insurers battle for a shrinking market share amid an ongoing squeeze on incomes. This has affected their bottom line, making some businesses unviable.

However, experts say the departure of insurers has been happening since the 1990s. Notable names include AXA, Bupa, Old Mutual and Scottish Provident.

“Insurers large and small have always come and gone from the protection market,” says Kevin Carr, protection consultant and MD at Carr Consulting.

Consolidation of consolidators will not be a ‘dramatic shift’

If the consolidation of consolidators mooted for the advice space happens, it will unlikely be a “dramatic shift” in the market, NextWealth consulting director Emma Napier has suggested.

Napier told Money Marketing she believes consolidation of consolidators could happen, but it is not going to be a “great big turn” for the industry.

“It comes down to the process that a consolidator has managed to embed,” she said. “The consolidation of consolidators will only occur if the seller finds the process [of buying small advice firms] too slow and needs to recapitalise, and the buyer can quickly see a clear route to market.

Quote Of The Day

As the old saying goes, failing to prepare is preparing to fail – and nowhere is this more pertinent than on Budget Day.

– Hannah English, head of DC corporate consulting at Hymans Robertson, comments on the importance of DC schemes ahead of the upcoming Budget.

In Other News

As part of Abrdn’s overall sustainability strategy, the Abrdn Charitable Foundation (aCF) has launched its inaugural innovation fund.

The fund is open to charitable organisations and other non-profit entities across the globe.

Organisations from across the UK, Americas, Asia-Pacific and EMEA, the four regions where Abrdn operates, are encouraged to apply.

One grant up to a maximum of £50,000 (or local currency equivalent) to be awarded per region.

The fund is looking to provide organisations with resources to pilot new projects linked to technology and innovation within ‘Tomorrow’s Generation’.

This features two themes – people and planet, which includes helping people overcome barriers and gain access to opportunities aligned with education, employment and financial wellness, as well as protecting nature and addressing climate change.

The application window for 2024 is from 1 October to 1 November.

UK executives dump shares on fears of Labour capital gains tax raid (FT)

Why even at 20 you should care about pension changes (BBC)

Dollar bulls suffer setback as traders add to Fed cut bets (Reuters)

Did You See?

Mark Dampier, an independent financial consultant, explores the reasons why active management is over.

He writes: “The changing nature of the asset management industry is a wonder to behold.

“When I first started out, the main recommendation for investment was a managed bond. Partly because so many adviser firms were being set up by those who had worked in the insurance industry selling life bonds and also because they would pay 5%-plus commission.

“At that time, unit trusts paid 3%. It wasn’t hard to see what was going to be sold the most.

“The 5% withdrawal, often described as tax free, was another selling point. Do you remember the income surcharge investors had to pay for their dividends too, again helping the sales of insurance bonds? And, of course, no regulation to begin with. What a cowboy’s charter.

“It’s good to see how much has changed – mostly for the better. The Retail Distribution Review was a big change, and the Consumer Duty has signalled a turning point for old poor practices.

“Meanwhile, the active management industry is now under the most pressure I have ever seen.”

Read the full article here.

IT’S FAIR to say that Alton Towers is one of the UK’s most-loved theme parks.

If you’re thinking about visiting the attraction, make sure you read our essential guide first.

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Alton Towers Resort is one of the UK’s most popular theme parks, with 40 rides and activities spanning from record-breaking rollercoasters to an indoor and outdoor waterpark.

Established on April 4, 1980, the Staffordshire-based theme park’s initial rides included the UK’s first-ever double loop roller coaster — the Corkscrew.

It is the largest theme park in the UK, covering 550 acres.

A new £12.5 million indoor rollercoaster codenamed ‘Project Horizon’ is set to be built, but very little is known about the project so far.

Opening times

Alton Towers opened its doors for 2024 on March 16.

The theme park closes over the winter, and this will be on November 7, 2024.

However, the theme park runs a number of seasonal special events, which are detailed below.

How to get there

The address for Alton Towers is Farley Lane, Alton, Stoke-on-Trent. ST10 4DB.

Located in Staffordshire, near the village of Alton, the nearest motorway exits are:

• M1 Northbound – Junction 23a
• M1 Southbound – Junction 28
• M6 Northbound – Junction 15
• M6 Southbound – Junction 16

For those travelling by public transport, Uttoxeter is the nearest train station to the resort.

From there you can take a 20-minute taxi or the 30-minute X41 bus.

An Alton Towers coach is also bookable through their website.

The bus departs from Birmingham Newman University, Northfields Super Store, University of Birmingham, TK MAXX New Street and Freffs Scott Arms Shopping Centre.

Ticket prices

Like most parks, it’s always cheaper to buy Alton Towers tickets in advance from their website.

Advance Alton Towers tickets can start at:

• 1 Day Pass — £29
• 2 Day Pass — £48
• Short break at the onsite hotel — £90 per family
• Waterpark pass — £18
• Golf 18 Holes — £6

On the day tickets start at:

• 1 Day Pass — £69
• 2 Day Pass — £80
• Waterpark pass — £25
• Parent and Toddler pass — £68

The theme park sells annual passes with discounts.

Alton Tower’s £99 Silver Pass can get theme park lovers up to 10% off food and drinks and a further 10% off the waterpark and Alton Tower’s Dungeon.

The £139 Gold Pass will beef this discount up to 20% and offer benefits such as a Bring a Friend voucher and Discounted Fastrack.

Merlin Annual Pass holders get a minimum of 200 days of off-peak entry to the park.

You can buy tickets on the day you visit from the admissions team, but prices are subject to availability and bookings may sell out.

Alton Towers’ best rides

Best for thrill-seekers — Nemesis Reborn

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Or features writer Richard Moriarty for The Sun tested out the latest addition to the park with his son, and had this to say about it:

“Daddy, this is awesome!” screamed my son as we were whizzed around the 716-metre track at speeds of up to 55mph.

As the name suggests, Nemesis really has been reborn. And wow. What a thrilling ride it offers.

Smooth, slick, exciting and terrifying in equal measure — it is a rollercoaster where, when you get off, you are not quite sure what just happened.

Best for families — Runaway Mine Train

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Runaway Mine Train is now the oldest rollercoaster at the theme park.

Even so, everyone enjoys a trip on this family-friendly coaster.

Plus, if you are patient and wait to ride later in the day, you might even be lucky enough to whizz around the track three or four times.

As The Sun’s Richard Moriarty explained: “… our gruesome twosome could ride together as they are both big enough, allowing mum and dad to enjoy a coffee.”

Best for toddlers — Get Set Go Tree Top Adventure

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This is the perfect place to start your family day out.

You can wake up the sleeping bugbies as you glide high above CBeebies Land on this toddler-friendly rollercoaster track.

Some of the other popular kids’ rides can be seen below, so you can also plan the rest of your day while up in the air.

Alton Towers events

Scarefest

Alton Towers runs a spooktacular annual Halloween Scarefest.

This includes Compound – a new live-action scare maze based on the Nemesis Reborn ride.

There is also a family-friendly interactive attraction called Amigos in the Afterlife.

Christmas

Their Christmas Day Out experiences (available on select days only) are the perfect way to escape dark and dreary winter days.

And for those wanting to immerse themselves in the magic of Christmas overnight, the park also runs Santa Sleepovers.

How to save money at Alton Towers

Thrifty mum-of-three Catherine Loftohouse gave her top tips on saving money when visiting the theme park.

She told The Sun: “If you pay on the day, it could cost £68 per adult and £64 per child at Alton Towers, so this year we saved about £280 just on that one day trip.”

Catherine continued: “This year, we visited Alton Towers in September and spent about £45 on six tickets.

“My brother and I both got a pair of Sun Superdays tickets as he lives in a separate household.

“Each pair costs about £9, as it’s the cost of nine copies of the paper (70p or £1 depending on day of the week) and then a £2 booking fee.

“Meanwhile we used a £25 adult and toddler ticket from the Alton Towers website for my husband and youngest son.”

There are many other ways to cut down on your trip.

Children under 3 can go free and the theme park offers Student tickets for £20 if you have a verified StudentBeans account.

Any parents visiting with a toddler (under 5) can save by purchasing a Parent & Toddler pass in advance for £29.

Additional children under 5 can be added onto the pass for just £5. This offer is not available during weekends and school holidays.

And as mentioned by Catherine, through Sun Savers you can unlock our Sun Superdays offer, which gets you two free tickets to Merlin attractions, including Alton Towers.

Find out about fastrack

Alton Towers fastrack tickets offer a variety of benefits.

As their website explains, these advantages include:

• Less time queuing: Exclusive fastrack queue lines offer reduced waiting time on some of our biggest rides and attractions. That means you have more time to explore and enjoy everything that we have to offer.
• Help planning your day out: Single shot fastracks come with a specific time slot to enjoy your favourite ride. Set up your fastrack slots to help plan an efficient thrill-seeking route around the park.
• Unbeatable package deals: Alton Towers’ packages combine some of our biggest thrill rides and family favourites. Book your fastrack experience as part of a package deal to enjoy big savings.

Alton Towers parking explained

There are a number of options for parking your car at the theme park.

Standard parking costs £10 for guests. 

Gold, Platinum and Premium Merlin Passholders are entitled to free Standard Car Parking.

There is no need to pre-book your parking space as you can just scan you pass at the exit barriers.

Standard Parking is between 15-25 minutes walk to the Alton Towers’ entrance.

You can follow the road signage to the carpark, or ask members of staff for directions.

As there are both grass and tarmac car parks, you may be parked on grass.

Express parking is charged at £20 for guests and can only be booked online in advance.

Gold, Platinum and Premium Merlin Passholders are able pre-book Express Parking for £10 (must be pre-booked online in advance).

CBeebies Land Hotel Guests get free express parking, but hotel booking confirmation must be provided.

Express Parking is a 1-3 minute walk away from the Theme Park Entrance.

Blue badge parking is charged at £10.

Gold, Platinum and Premium Merlin Passholders and on-site hotel guests are not charged for blue badge parking — but your current and valid blue badge must be presented, with the badge holder present in the vehicle which is requesting disabled parking.

One vehicle is permitted to park on blue badge parking per blue badge (spaces on the day will be allocated subject to availability on a first come first serviced basis).

Average Alton Towers queuing times

According to QueueTimes.com, the average waiting times for the park’s top 10 busiest rides are as follows:

• Wicker Man — 48 minutes
• The Smiler — 46 minutes
• TH13TEEN — 34 minutes
• Rita — 32 minutes
• Galactica — 31 minutes
• Spinball Whizzer — 28 minutes
• Gangsta Granny: The Ride — 26 minutes
• Get Set Go Tree Top Adventure — 26 minutes
• Octonauts Rollercoaster Adventure — 26 minutes
• Runaway Mine Train — 25 minutes

While you’re here, take a look at Legoland Windsor, Thorpe Park and Chessington World of Adventures‘ opening dates, ticket prices and locations.

In a seven-minute interview on September 30, CBS anchor Tony Dokoupil pressed author Ta-Nehisi Coates on the most contentious parts of his new essay collection, The Message, which tackles the Israeli-Palestinian conflict. The fallout continues to reverberate, with Paramount Global’s CEO, Shari Redstone reportedly admitting that CBS’s decision to reprimand Dokoupil was a “mistake.”

Dokoupil’s line of questioning was direct but fair: “Why leave out that Israel is surrounded by countries that want to eliminate it?” He also noted that the book “would not be out of place in the backpack of an extremist,” highlighting its omission of any mention of Palestinian terrorism.

Instead of engaging in an open debate, The Free Press revealed how CBS succumbed to internal backlash and forced Dokoupil to apologize. This reprimand of a journalist for merely doing his job reveals a glaring double standard in how major networks handle guests’ views on Israel.

The hypocrisy is staggering. CBS staffers weren’t upset because Coates was unfairly treated but likely because it might have been the first time he was genuinely challenged. For years, Coates has enjoyed kid-glove treatment from a media eager to praise him.

Take his recent interview with Chris Hayes on MSNBC. Hayes echoed nearly everything Coates said, even going so far as to declare that Israel is committing a “moral abomination.” When asked if critics might accuse him of engaging in a “one-sided propaganda tour of Israel,” Coates was handed a convenient opportunity to deny it, invoking segregation and apartheid: “I am against segregation. I am against apartheid. I am against Jim Crow. Nothing will make that OK.”

This false equivalence—comparing Israel to apartheid-era South Africa and the segregationist United States—went unchallenged, presented as unvarnished truth.

Similarly, an interview between Coates and journalist Michel Martin on Christiane Amanpour’s show was another exercise in softball journalism. When discussing Coates’ comparison of Israel to Jim Crow America, Martin lobbed a question tailor-made to invite more inflammatory rhetoric: “You say it’s a place where the glare of racism burned more intensely than anywhere else in your life. Tell us why.”

This provided Coates the platform to make blatantly inaccurate claims about “roads only for Israeli settlers” and separate roads for Palestinians—an anti-Israel trope. The interview concluded with Martin summing up Coates’ position: “So your core conclusions are: it’s an apartheid regime, and the life there for Palestinians is unbearable.”

Coates responded with more unchecked hyperbole: “It’s unbearable. It’s demeaning. It’s dehumanizing. And it’s morally unjustifiable.”

Unbelievable. @CBSNews reprimanded a journalist for doing his job—challenging @TaNehisiCoats‘ limited understanding of the Israeli-Palestinian conflict. https://t.co/ZBEBcReNjg

— HonestReporting (@HonestReporting) October 8, 2024

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Then, in an October 3 interview on The Daily Show, Jon Stewart offered Coates near-universal praise, applauding him for his supposed bravery: “Through your discomfort… you’ve done the most important thing, which is trying to advance an understanding of a complexity that we haven’t figured out in 10,000 years.” Stewart’s flattery only underscores the absurdity of the situation: Coates is being lauded for “figuring out” millennia of conflict during a 10-day trip to Israel.

The contrast becomes even more stark when comparing this fawning treatment to a CBS interview between Gayle King and Thomas Hand, whose daughter Emily was taken hostage by Hamas on October 7. In discussing life in Israel before the massacre, Hand reflected: “The greatest movement towards peace that Israel ever did was pulling out of Gaza. Israel has never made such a big step towards peace, and it got us nothing. They didn’t make even a baby step back toward peace.”

WATCH: CBS’s Gayle King LECTURES the father of a eight-year-old Israeli girl being held hostage by Hamas that “innocent children in Pales –Palestinians…are dying” too just as “innocent Israeli children” and, b/c of “politics,” “no one seems to be able to say enough, stop” pic.twitter.com/5qkg2QUMNn

— Curtis Houck (@CurtisHouck) November 15, 2023

Rather than allowing this poignant statement to stand, King pivoted to ask about innocent Palestinian children dying. Hand’s response was as raw as it was revealing: “I’m not interested in politics at all. My only concern is getting Emily back, whatever it takes.”

CBS staffers said nothing about this segment. But Coates being asked a question? That crossed the line.

The CBS-Coates controversy perfectly encapsulates a troubling dynamic within mainstream media: challenge pro-Israel narratives, and you’ll be praised for your courage. Question anti-Israel falsehoods, and you’ll be forced to apologize. Ta-Nehisi Coates has been elevated as an intellectual authority, yet his writings expose a limited grasp of both history and modern geopolitics.

Sadly, the erosion of journalistic integrity in the United States means that anyone daring to point out uncomfortable truths is treated as a pariah. Dokoupil’s questioning exposed the media’s weakness, and they couldn’t tolerate it.

Liked this article? Follow HonestReporting on Twitter, Facebook, Instagram and TikTok to see even more posts and videos debunking news bias and smears, as well as other content explaining what’s really going on in Israel and the region.

This week was a landmark for UK pensions, with the launch of a new collective pension arrangement offering the potential of better retirement outcomes for millions of people.

On Monday, Royal Mail became the UK’s first employer to offer a collective defined contribution (CDC) pension to staff — six years after it was originally announced. 

The government also published plans to boost the take-up of CDC by allowing multiple employers to join a single plan, in contrast to Royal Mail’s single employer plan.

CDC seems to offer a higher and less risky pension than individual DC, as well as boosting investment in UK private assets. But can it really do what it says on the tin?

Private sector defined benefit (DB) pensions, guaranteed by an employer, are all but extinct, replaced by defined contribution (DC), with people saving into individual pots and taking their own investment and longevity risk.

CDC sets an annual “target pension”, based on the value of assets from employee and employer contributions, plus investment returns. Target pensions are not guaranteed, but can move up or down each year — including for pensions already being paid — depending on asset values.

To fund its ambitious growth plans, the government is trying to push pensions into UK “productive assets”, and it hopes CDC is another pool of money to be invested in infrastructure, start-ups and private equity.

In 2023 major pension providers signed the Mansion House Compact to allocate 5 per cent of assets in the DC “default” funds to private assets, and the government hopes about £50bn will be invested by 2030.

By how much CDC could increase this target depends on CDC take-up, and the allocation to private assets.

Since Royal Mail’s announcement six years ago, no other companies have signed up to CDC, and no pension provider has said it will set-up a multi-employer CDC.

Suppose 10 per cent of DC assets move into CDC, and that CDC holds 10 per cent in private assets, double the Mansion House DC target. Overall DC and CDC private assets would only increase to 5.5 per cent, barely moving the dial versus DC alone.

But CDC fans claim it can hold a much higher chunk of higher-risk assets than DC, because of “intergenerational risk sharing”, when members of different ages pool investment risk and longevity.

This claim gets to the heart of the CDC fallacy. For any asset allocation, CDC investment risk is exactly the same as DC.

Intergenerational risk-sharing is a myth, because legislation prohibits “buffers” to “smooth” outcomes. CDC plans are not allowed to hold assets in a buffer, to be released when returns are worse than expected, or added to when returns are better than expected, as with discredited “with-profits” policies.

If CDC assets fall by, say, 20 per cent, target pensions also fall by 20 per cent for all members — an 80-year-old pensioner, or a 30-year-old employee.

This is exactly the same as a DC saver with their own pot. If assets fall by 20 per cent, their “target pension” falls by the same amount.

We shouldn’t fall for the false promise of better retirement outcomes by shifting to complex, opaque and costly CDC pensions

Identical contributions and identical asset allocation produce identical CDC and DC returns, but, of course, CDC comes with higher management costs. The government should not expect CDC to hold any more private assets than DC.

CDC also imposes the same asset allocation on all members, regardless of their age or risk preference. DC gives everyone the flexibility to choose their own level of investment risk, which may change as they approach retirement. 

What about Royal Mail’s CDC? It has 6 per cent member and 13.5 per cent employer contributions, giving an inflation-linked target pension of 1/80th of salary, plus 3/80ths cash, from age 67. Over 40 years, members could earn a target pension of half average salary, plus a cash lump sum of three-times pension. 

But this looks unexciting — at today’s inflation-adjusted long-term gilt rates it’s an average return of only gilts plus 1 per cent. A DC saver could achieve the same “target pension” by holding low risk-gilts and corporate bonds, with just a smattering of higher-risk equities.

CDC was really only ever attractive to the few private sector companies still offering DB, not the overwhelming majority with DC. But now the annual cost of DB pension promises has been slashed, thanks to much higher long-term interest rates, these companies have no incentive to close their DB pensions and make the leap into the CDC-unknown.

Although there are no “magic beans” in Royal Mail’s CDC, what sets it apart from “normal” DC is the generous 13.5 per cent employer contribution, higher than most blue-chip companies, and much higher than the 3 per cent legal minimum. 

And total contributions of almost 20 per cent of salary are enough for Royal Mail staff to build-up a decent DC pension pot, and a decent pension.

We shouldn’t fall for the false promise of better retirement outcomes by shifting to complex, opaque and costly CDC pensions. The only real way to improve pensions is with simple, transparent and cheap DC pots, and higher contributions.

John Ralfe is an independent pensions consultant. X: @johnralfe1