Personal account pensions to be trust-based scheme

Personal accounts, a plan which is set to be introduced in 2012, will be a trust-based occupation pension scheme, it has been announced.



Work and pensions secretary John Hutton told a National Association of Pension Funds conference last week that the decision means personal accounts "will face the very same level of regulation as all other trust-based occupational schemes".

Additionally, he explained that a members' panel will be used to give consultation and advice to trustees.

"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," he added.

The idea for the panel comes from the United States, where a similar system is in place for the thrift savings plan for government employees.

In related news, in June, the government will give a response to its consultation on its white paper on personal accounts.

Employees, employers and the state will contribute to personal accounts, in which individuals will be automatically enrolled unless they choose to opt out.

The accounts are also able to be transferred between employers and times of employment.

Legal & General: Employers should be given pensions choice Employers who are opting out of personal accounts under new pensions proposals should be given a choice about automatic enrolment, Legal & General has claimed.

The financial services company said that employers opting out of personal accounts should either introduce automatic enrolment for their scheme, or confirm that their scheme either meets or exceeds the level of membership take-up required by personal accounts.

One of the key proposals in the government's second white paper on pensions is that eligible employees should automatically be enrolled in a low-cost personal account for pensions saving or an employer-sponsored scheme.

However, Legal & General claims that requiring employers to meet the benchmark take-up set by personal accounts has "a key economic driver that will help to protect superior existing schemes".

The firm said that for generous occupational pension schemes to continue, it is essential that the staff for whom the employer makes contributions should value those contributions.

Legal & General's wealth policy director Adrian Boulding explained: "For example, if a pension scheme attains 50 per cent membership through automatic enrolment, then the employer has attracted the half of his workforce that cares least about spending time to opt out.

"But if an employer achieves 50 per cent membership by promoting and communicating the valuable benefits that the pension scheme offers, the employer has attracted the half of his workforce that place the greatest value on the employer's contributions."

'Pensions mistrust means Britons opt for cash'

People are choosing cash over shares when it comes to pensions because they are mistrustful of the industry, an expert has claimed.

Steve Ashton, chief executive at over-50s specialist Saga personal finance, said that a major reason for people sticking with cash in preference to other choices which were potentially more profitable was that they didn't understand enough about their options.

Many were embarrassed to ask and the financial services industry was often not very good at putting things in plain English, he explained.

However, people were also put off other investment options for pensions by incidences of consumers apparently being mistreated by large financial institutions, with two or three cases coming out a year, Mr Ashton added.

He commented: "The impact that that has is that probably a lot more people save in cash than would otherwise be the case. Because they say: 'I can understand cash, I know exactly what I'm getting, I don't need anybody else involved'."

People ought to have more money tied up in a broad base of shares and equities as history had shown that over the space of ten or 20 years stock markets will outperform cash investments, he advised.

A third of Britons delay their retirement planning because they cannot understand financial jargon, according to research from six-steps.

Landlord Mortgages comments ‘The Buy To Let market shows that a wide range of investment opportunities exists. No longer are consumers restricted to cash investments held in investment accounts at their local high street bank.’

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