24 May 2007 - Consumers to be at heart of new pensions savings scheme - Hutton
The interests of consumers will be at the heart of the Government’s proposals for a system of personal pensions savings accounts, Secretary of State for Work and Pensions John Hutton said today.
Mr Hutton announced that Personal Accounts would be a trust-based occupation pension scheme, run by trustees who would be legally obliged to handle the scheme’s assets in the best interests of members.
And he announced he would be establishing a Members’ Panel to ensure that members’ views were taken into account by the trustees running the scheme, into which employees across the UK will be enrolled when they are introduced in 2012.
John Hutton told a National Association of Pension Funds conference in Manchester:
“Personal accounts will be the biggest step forward for workers seeking to build up a pension since National Insurance was introduced in the 1940s. But if we are to make them a success for the millions of people who currently aren’t saving for a pension, we must put in place measures to ensure they have the interests of future members at their heart.
“Protecting the interests of members underpins our decision to establish the scheme as a trust-based occupational pension. As such they will face the very same level of regulation as all other trust-based occupational schemes.
“A board of trustees will take ultimate responsibility for setting the strategic direction for the scheme from the collection of contributions to the investment of assets and payment of benefits. This will include deciding on the choice of funds and the strategy for the investment of the default fund; the appointment and management of external fund managers and ensuring that contributions are invested in the best interest of members.
“This will be important in ensuring that personal accounts deliver for our target group. As we emphasised in our Personal Accounts White Paper, it is essential to the success of the scheme that members’ needs remain at the core of operational decision-making.”
Mr Hutton emphasised that personal accounts would be run independently of Government, and that the scheme would remain focused on its target group of employees who did not have access to a good occupational pension scheme. The aim of the scheme is to complement rather than compete with existing quality provision.
He added:
“Our plan is to create a Members’ Panel along similar lines to the Thrift Savings Plan in the USA.
“The panel could nominate a proportion of the trustees and would be consulted by trustees on key decisions, providing them with access to the views of members, and a stronger sense of collective ownership. Given the scale of personal accounts, I believe such an approach could be absolutely critical to the success of the scheme and increasing confidence across the whole pensions industry.”
The Government will provide its response next month to the consultation on its White Paper Personal accounts: a new way to save.
Notes for editors
- The White Paper, Personal accounts: a new way to save, was published in December 2006. Further information is available at: www.dwp.gov.uk/pensionsreform/
- In order to overcome barriers to saving, the Government proposes to automatically enrol employees into personal accounts or a qualifying workplace scheme from 2012. It is anticipated that 6-10 million people will save for their retirement into personal accounts.
- For the first time employees will have a guaranteed right to a contribution from their employer to boost the value of their pension pot. Personal accounts will have low charges enabling people to keep more of their savings.
- Employees will see their savings matched £1 for £1 by a combination of contributions from their employer and the Government. The employee will put in a minimum of four per cent of their salary, the employer a minimum of three per cent and one per cent from the Government in tax relief.
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