Limit powers of Personal Accounts Board, stakeholders urge
UK - Stakeholders in the pensions industry want the authorities managing and setting up the individual accounts scheme in the UK to have a very focused and narrow remit, according to a study by the Pensions Policy Institute (PPI).
Plans by the government suggest the creation of a Personal Accounts Board which will run the new auto-enrolment defined contribution (DC) scheme to be introduced from 2012. For the implementation phase a Delivery Authority is to be set up.
The PPI conducted a survey among stakeholders from 20 organisations in the pensions policy community about their views on the role, granted powers and structure of those authorities.
Almost all interviewees agreed the Personal Accounts Board should not be responsible for "monitoring and enforcing employer compliance or registering exempt schemes". These tasks should be delegated to a separate government board.
However, stakeholders could see both the Delivery Authority and the Board giving advice on broader pension policy reform, such as monitoring overall saving levels. A warning was given regarding a risk of non-delivery is the Authority is tasked with too large a remit.
The study, co-sponsored by the Department for Work and Pensions (DWP), the Investment Management Association (IMA) and the National Association of Pension Funds (NAPF), saw a strong demand for member representation on the board. Furthermore, the Board should be accountable to the public via an annual report that is laid before Parliament.
The Swedish model of the 'orange envelope' "was mentioned by several interviewees as useful model for reporting to members", the PPI stated.
In Sweden, members of the premium pension system PPM receive an orange envelope every year with a statement on their current level of savings.
As for the membership of the Board and the Authority, stakeholders said they "want to see the Personal Accounts scheme designed and set up by people with experience running large multi-employer occupational schemes and who have experience of the Personal Accounts target market," the PPI summarised in its report on the study.
Interviewees also said a continuity between membership in the Authority and the Board would be useful but conceded this might be difficult as different skills will be needed in the various phases.
Although the DWP was commended for its open consultation and engagement process thus far the stakeholders said there was a need for more research into the target group of the scheme.
Indeed, a recent study by B&CE Benefit Schemes, a not-for-profit provider of stakeholder pension schemes, shows many employees would like to see pensions made easier to understand. It also showed a lack of knowledge about tax-incentives for retirement saving.
B&CE suggests this as one of the reasons why 64% of the 780 workers interviewed face-to-face were in favour of auto-enrolment.
Their study found one in four is currently not making any additional pension saving with 21% "saying they have not got round to it yet", B&CE stated.
Only 14% said they could not afford the 4% which will automatically go into the new DC scheme, but out of those the majority conceded they would have to get used to it.