What’s in a name?

Shakespeare wrote some pithy lines in the 17th century about names. You’ll find those lines in Romeo and Juliet. In essence he contended that calling a rose something else would not make it smell any less sweet.

Well, I think names do matter, especially when it comes to private pensions. The latest generic term for a pension plan design that combines elements of defined benefit plans with defined contribution plans is Collective Defined Contribution, or CDC.

These plans have been around conceptually for many years and there are some in existence in a commercial environment, but they are still in their infancy as far as generally accepted plan designs, take up, public understanding and regulatory acceptance go. It is obvious to me that the embryonic development is due to their name. Who would be interested in CDCs? They need to be called something more dynamic and enticing. My suggestion is: With Profits Endowment Assurance plans. For that is what they are.

With profit endowment assurance plans were all the rage once. I know this because I’ve read about them. Mutual life insurers (actually assurers for life risk, insurers for general risk) and friendly societies from the time of Shakespeare until the late 20th century had huge volumes of business on their books under these plans. They used to provide the same characteristics of benefits to customers as CDCs do. Their funding characteristics and risks are the same. They were, it seems, ahead of their time. Until the heady 1990s, when they became dinosaurs: the world turned away from life assurers and friendly societies formed on the mutual model. Many actuaries’ invoices were prepared based on hours spent on the demutualisation phase from the 1980s through early 2000s. Chrysalis like, shareholder companies emerged from the discarded cocoons of the mutuals. They offered DC plans. Eventually, Peggy Lee’s song “Is that all there is?”, previously playing unnoticed in the background, was heard again. Is that all there is to DC? (Look her up on Spotify.)

Is the With Profits Endowment Assurance Plan making a comeback? The big wheel turns.