Pensions delivery body clocks up £11m accounting deficit
UK - The Personal Accounts Delivery Authority (PADA) has ended the financial year to 31 March 2009 with a net accounting deficit of £11.1m (€12.8m) in its "general fund" of capital, as funding solely from the government was insufficient to meet annual costs of £30.9m.
In its first full year of accounts PADA revealed £13.1m was spent on staff costs, including contributions to a defined contribution (DC) pension scheme for 47 employees, while a further £17.7m related to other operating costs involved in advising on and establishing the new system of personal accounts.
Figures showed the net costs of the scheme, transferred to the general fund, reached £30.9m, however while PADA received £18.5m in 'grant-in-aid' from the Department of Work and Pensions (DWP) and had an additional £1.3m left over from the first 'capital injection' of £3.3m in 2008, this still left a net deficit of £11.1m. (See earlier IPE article: PADA halfway through first £3.3m capital)
However following the extension of PADA's role from an advisory non departmental public body (NDPB) to an executive NDPB, the organisation can avail itself of a loan from the DWP to meet scheme implementation costs, which are then referred to as "chargeable costs" as they will be repaid by the scheme members.
To help pay the £11.1m of "chargeable costs" PADA withdrew £5.6m of loan finance from the government in 2008/09, with interest charges of 6.84% due in September and March, which will be transferred to the trustee corporation when it takes over from 2010 with the aim of repaying it by 1 October 2012.
The annual report noted this is an "interim funding arrangement" that will be reviewed following a decision on the funding strategy of personal accounts, but because the loan does not count as capital the accounting deficit in the general fund remains at £11.1m even though the actual shortfall - covered by short-term finance measures - is £4.5m.
PADA used the report to highlight its progress in setting up the personal accounts regime, scheduled for 2012, including the start of the procurement process for scheme administration services - now shortlisted to four providers - and the publication of consultations on decumulation and investment. (See earlier IPE article: ATP heads up personal accounts admin shortlist)
Looking ahead the report revealed the organisation will conduct research into improving understanding of how employers, individuals and the pensions industry will react to personal accounts to feed into the distribution strategy, while it will also focus on testing scheme communication products.
Tim Jones, chief executive of PADA, said: "I am pleased to report on our progress this year and achievements so far, while remaining mindful of just how far we have yet to go. Success will mean a better quality of life in retirement for millions of people. The importance of this goal drives everything we do."
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