Flaws in the government’s planned ‘Personal Account’ pension scheme have been highlighted by new quality standards for company or occupational pension schemes from the National Association of Pension Funds (NAPF).
NAPF has created a Pension Quality Mark based on criteria which define what a good pension should entail.
The Pension Quality Mark will be awarded to defined contribution occupational pension schemes which meet the following criteria:
- Employee contributions of 10% of salary and employer contribution of 6%
- Administration and funds management charges limited to 1% of the main funds
- High levels of clarity and ease of understanding in communications to pension fund members
The criteria which underpin the government’s proposed Personal Accounts Scheme fall well short of the above quality levels. The government’s pension scheme postulates statutory minimum contributions of just 4% of workers’ salaries plus an employer/company contribution of 3%, with 1% in tax relief on top.
Companies with pension schemes that have already qualified for the Pension Quality Mark include Marks & Spencer, Standard Life, Kellogg’s, and IBM.
An even higher quality standard is available from NAPF as well. The Pension Quality Mark Plus will be awarded to schemes where employers contribute 15% of earnings, and their company contributes the equivalent of 10%.
The government’s Personal Account Scheme will be phased in from 2012, and all UK employees not already contributing to a workplace or personal pension will be automatically enrolled into the scheme.
Employers or individuals wishing to avoid the Personal Account Scheme by making their own provision, should request advice from their financial adviser to set up an occupational pension scheme for them, before that time.
