Personal Accounts Delivery Authority


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Personal Accounts Delivery Authority risk compromising employer-sponsored pension schemes

UK
London, 29 April 2008

Mercer expresses concern that PADA’s priorities will impact adversely on wider pension provision

Responding to the Personal Accounts Delivery Authority’s (PADA) consultation ‘building personal accounts; choosing a charging structure’, Mercer has cautioned that the priorities PADA has identified for developing its stance on charging structures risk undermining existing employer schemes. Mercer also believes that PADA are not aligned to the Government’s original intention of maintaining existing pension provision where this is provided.

The Pensions Bill will have the effect of mandating employer contributions to qualifying schemes where employees choose to remain opted in. It establishes personal accounts as one of a number of types of qualifying schemes. Employer-sponsored schemes can also be qualifying schemes providing they meet certain criteria.

Deborah Cooper, principal at Mercer commented, “There are existing schemes that provide higher benefits for members on low to medium incomes than personal accounts, or ‘qualifying schemes’. The Pensions Bill as drafted will make companies choose between undergoing an expensive restructuring of their present arrangements, or adopting personal accounts. Employers that do not currently auto-enrol employees into their arrangements will experience increased costs after 2012. Faced with the inflexibility and complexity currently being proposed many are likely to throw in the towel and opt for personal accounts for all employees.”

Deborah Cooper commented, “This undermines one of the Government’s key objectives. Personal Accounts are intended to complement existing pension schemes. They apply to a particular target group that does not currently have access to employer-sponsored provision.”

Mercer also expressed concern over the information supplied in the consultation document.

According to Deborah Cooper, “The level at which charges are struck is not considered by PADA. PADA is also not explicit about the costs involved, having previously sought to distance itself from the original 0.3% per annum target. The document also doesn’t seem to recognise the extent to which employers often meet the costs in employer sponsored schemes. As PADA develops the personal account regime, it must be sensitive to the variety of pension scheme designs and products already available and be careful not to undermine employer-sponsored provision generally.”