The National Association of Pension Funds is proposing the development of a Good Workplace Pensions Quality Mark by 2012.
Part of the NAPF’s five-point plan, which it submitted in its response to the pensions white paper consultation, the quality mark would apply to good quality schemes which provide a higher level of benefits than the proposed personal accounts.
In its proposals for developing a pension scheme quality mark, the NAPF says the criteria for the award would take into account contribution levels, member communications and any associated benefits.
The NAPF, which is setting up a working group to look at the issue in more detail, believes the introduction of such a scheme could help minimise the possibility of employers ‘levelling down’ their contributions to existing schemes to the 3% level proposed for personal accounts.
Joanne Segars, who starts her role as chief executive of NAPF today, says: “The quality mark will help employers communicate the benefits of their pension scheme. They can use the quality mark in job ads and employee communications, and employees would be able to easily see the value of their pension scheme.”
Speaking at the NAPF’s Autumn Conference on September 21st, in one of her last appearances as chief executive, Christine Farnish, who has now moved to Barclays, said it ought to be possible to come up with some kind of simple quality mark.
She suggested the symbol could work in a similar way to the British Safety Executive (BSE) kitemark which is widely recognised as a sign of good quality, and which, she argues, would denote a system of good governance and good levels of employer contributions.
At the conference, Farnish also referred to the private members bill put forward by Labour MP John Denham, in December last year, which proposed a requirement for employers to include employee benefits such as pensions into their job advertisements.
Farnish suggested this was yet another way to try and encourage existing provision and provide a simple logo or symbol which people would automatically associate with good quality pensions.
Rachel Vahey, head of pensions development at Aegon Scottish Equitable, says the NAPF initiative is a very good idea and is very much in line with industry thinking.
But she says she would want to go a bit further and have a definition of what a good scheme is issued earlier than 2012, preferably around the time the personal account legislation receives Royal Assent.
Vahey says employers would then be able to start promoting these good quality schemes straight away, as she warns if we don’t accept the promotion of these schemes, the chances of levelling down could become very real.
But she warns the definition of what constitutes a good quality scheme would have to be extremely simple so employers could look at it and know immediately whether they fit into the category.
Vahey also suggests the definition should cover all schemes where employers contribute more than 3% of basic earnings, regardless of employee contributions.
She adds: “What the NAPF is doing is indicative of the whole industry of us coming together to decide how to promote these schemes, and it is part and parcel of what the government should be doing now.”
However, Vahey suggests there is no point in just introducing a symbol as a pension quality mark and saying this means a good scheme unless the message is properly communicated to consumers and the government is prepared to support it.
She says: “The government needs to spearhead a national campaign now, in a sort of branding or marketing exercise, to tell people they should start saving in a good pension scheme, then the symbol or quality mark can be introduced. Only with this level of recognition, through government cooperation, will such a system make an impact in helping to promote good schemes.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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