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Personal accounts to rollout ahead of auto-enrolment

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  • Personal accounts to rollout ahead of auto-enrolment

UK - The personal accounts delivery authority (PADA) has confirmed it wants to launch the new trust-based occupational scheme before the introduction of compulsory employer contributions and auto-enrolment is introduced in 2012, in a bid to iron out any problems.

A joint consultation paper between PADA and the government on the scheme order and rules revealed the new system of personal accounts is intended to be run by a trustee corporation of between nine to 15 members, who will be responsible for the running of the scheme including investment decisions, member and employer engagement and scheme charges.

The trustee corporation will receive input from both a member and an employer panel, and the member panel will also be involved in the recruitment and selection of trustees in lieu of the existing member-nominated trustee requirements, which parties claims could "prove a costly and ineffective mechanism for representing members' views".

In addition, the scheme order and rules - which set out details including eligibility, member and employer participation and pension transfers - confirm panels members can be paid and trustees will receive indemnity protection although the rules also allow for additional commercial cover to be paid for, from scheme funds.

The government has also confirmed it intends to consult on approaches to implementing employer duties later in the year, but even with a 'staging' process it is expected the scheme will have to deal with a large number of employers and members in a short period so PADA wants to "launch the scheme prior to the introduction of the employers' duties".

It claimed this would ensure the scheme can manage the activity in an "efficient and controlled way" by allowing the trustees and the scheme administrator to "test the majority of the scheme's administration processes, and to identify and resolve any operational problems which arise". 

However, while employers can join the scheme ahead of the legal requirements "where it is practical", the document said some "scheme provisions cannot be replicated; primarily these are around automatic enrolment and opt-out", and it warned that in all other areas the scheme "will need to comply with the legislative regime in force in the same way as any other occupational pension scheme".

The consultation, which closes on 20 July 2009, also highlighted the possibility of providing trustees with powers to avoid "disproportionate" costs falling on members by asking for feedback on appropriate measures to "deal with employers who persistently fail to meet the agreed terms and conditions of the scheme".

Other details revealed by the draft order and rules included:

Members are able to access savings any time between the normal minimum pension age (55 from 2010) and the latest date for trivial commutation or a lump sum, (currently before 75) The scheme will accept pension credits as a result of divorce or dissolution of a civil partnership that will not count towards the annual contribution limit Third-party contributions - from family members or friends - will be allowed but they will count as member contributions and apply towards the annual limit of £3,600 - in 2005 terms.

The consultation concluded: "We believe these proposals strike the correct balance between setting a framework for the trustee corporation to run the scheme and the wider public policy objectives. The proposals also take account of the best practice of pension schemes whilst recognising the unique nature and scale of this scheme."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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