|
There is no
clear consensus view on the most appropriate charging structure
for personal accounts, according to the Personal Accounts Delivery
Authority’s (PADA) charging structure consultation response.
PADA said it received over 40 responses to the consultation, including
opinions from industry bodies, pension scheme providers, consumer
groups, employer groups and interested employers.
The majority of respondents were in favour of either an annual management
charge (AMC) only structure or a contribution charge with an AMC.
Those in favour of an AMC only structure saw it as simple and transparent,
which they felt would encourage participation in the scheme. Respondents
in favour of a contribution charge with an AMC argued that it would
be the most sustainable option, with the flexibility to deal with
a range of business risks.
The document also sets out how the responses received will help
PADA shape its recommendations. PADA intends to provide advice to
the Secretary of State for Work and Pensions on a potential approach
for the charging structure for personal accounts before the start
of the procurement process.
Paul Myners, chairman of PADA, said that the responses show there
is “no easy answer” to the issue charging structure:
“What is clear is that the charging structure will be a key
design for the scheme. The choice of charging structure will have
a direct effect on member outcomes. It will affect the viability
and sustainability of the scheme and it may have an impact on participation
in the scheme.”
The options of a joining fee and a contribution charge-only structure
received only limited support from respondents, and arguments against
these options included potentially negative perceptions of a joining
fee for a scheme which auto-enrols members. This could, according
to PADA, encourage opt-out and the perceived unsustainability of
a contribution-only charge in the long term.
The consultation also asked whether additional charges should be
made for certain activities to keep the costs of the scheme down,
a suggestion that was generally supported by respondents.
Chief executive, Tim Jones, added: “Although there is no clear
consensus about which charging structure would be best, there is
agreement about the qualities the charging structure will need to
help personal accounts succeed in its ultimate goal – that
of achieving adequate retirement outcomes for more people.
“Our job now is to consider the options and issues further,
taking into account the responses we have received, before providing
recommendations, later this year, to the Department for Work and
Pensions.”
-
Pensions Age July 2008
|
