The personal accounts board should include consumer representation in the form of a panel similar to those used by the Financial Services Authority, claims the Pensions Policy Institute.
In its report ‘What should be the roles and objectives of the Personal Accounts Delivery Authority and Board?’ the PPI says the research reveals some stakeholder feel consumer representation on the new Board will be ‘critical’.
The government has outlined a three-stage process to the setting up of personal accounts which starts with an advisory delivery authority which is being established in the current Pensions Bill.
However, as this Bill has almost passed through Parliament the PPI says it has focused its research on the later two stages of the process, which is an executive delivery authority – with powers to set up contracts with providers – and the personal accounts board which will take over the running of the scheme from 2012.
The 72-page document outlines the possible structure of these bodies including the scope of its remits, although not the funding aspects, with the PPI suggesting there are three options:
- Narrow: where the delivery authority and board both focus exclusively on tasks relating to the setting-up and running of personal accounts
- Broad: where it focuses on personal accounts but also looks at outside areas such as the impact on existing pension provision and the issue of generic advice
- Hybrid: where it focuses on personal accounts and offers advice to the government on outside issues but does not have any additional responsibility
The PPI says most of the respondents to its research, which included interviews with 32 representatives of 20 stakeholder organisations, preferred the narrow or hybrid remit, as many are concerned the delivery authority and board could get sidetracked from the overriding issue of “governing in the best interests of members and beneficiaries”.
With the report noting overall the respondents support the idea of consumer panel rather than an independent body or watchdog, as the best way of representing consumer interests.
Although, several interviewees recognise the advantages of having one agency oversee all aspects of implementing the personal accounts policy and scheme – as it could provide more focused consultation and better integrated systems.
But the PPI says nearly all of the people who took part in the interviews “stress that setting up a national pension savings scheme is an ambitious undertaking, and they warn there are risks involved with giving the delivery authority too much to do”, such as a diluted focus which results in the non-delivery of personal accounts.
In addition, the PPI says the research has highlighted some potential risks to the success of personal accounts, including the damage which could be caused by a ‘negative’ launch where the system is surrounded by public criticism.
And the report warns there are “numerous logistical challenges” associated with designing, implementing and running a large pension scheme on time and within budget, including the designing and building of an IT system which can handle the number and diversity of contributions; designing customer service and complaints handling procedures, and ensuring a consistent level of service across multiple contractors.
In particular it warns there is a specific challenge in having the delivery authority setting up contracts and the Board managing them over time, so it states contracts need to strike the right balance between stability and flexibility, as the delivery authority may enter into long term contracts which achieve best value for money, but do not allow sufficient flexibility for the Board to alter or terminate contracts in the future.
And the report points out a key risk to personal accounts is high opt-out rates and low persistency, which could result in lower than expected additional pensions saving and higher than expected charges for individual members.
The PPI also argues even if the delivery authority and the Board are both given broad remits, there is a risk the public will still hold government responsible for scheme performance because the scheme is established in legislation.
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 7034 2681 or email [email protected]IFAonline
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