John Hutton, Secretary of State for Work and Pensions, has revealed personal accounts will be run by trustees who will take "ultimate responsibility" for the "strategic direction" of the scheme including choosing funds and collecting contributions.
In a speech to the National Association of Pension Funds’ (NAPF) annual conference, Hutton says he will also be establishing a ‘Members’ Panel’ to ensure views of the members are taken into account by the trustees running the scheme.
The government had previously confirmed the new system of personal accounts, which are scheduled to start auto-enrolling members from 2012, would be classed as an occupational pension scheme with a Board in place to oversee the running of the operation.
However in his speech, ahead of the Government’s response to the personal accounts white paper consultation which will be published next month, Hutton confirmed the new system will face “the very same level of regulation as all other trust-based occupational schemes”.
He warns if personal accounts are to be a success for the "millions of people who currently aren’t saving for a pension", there needs to be measures in place to ensure it has the interests of future members at its heart.
He says: “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.”
He says this will include deciding on the choice of funds and the strategy for the investment of the default fund as well as the appointment and management of external fund managers and making sure contributions are invested in the best interests of members.
Hutton also emphasised that personal accounts will be run independently of Government, and that the scheme would remain focused on its target group of employees, as the aim is to complement rather than compete with existing pension provision.
Outlining plans for the creation of the Members’ Panel, Hutton suggests it will be along similar lines to the Thrift Savings Plan in the USA.
He says 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,” adds Hutton.
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