· 2 min read · Features

Automatic enrolment will give stakeholder pensions the boost they need


There has been some commentary in the media recently suggesting stakeholder pensions are of reaching the end of their shelf life.

This is far from the case: stakeholder pensions are about to benefit from a considerable boost by the forthcoming introduction of automatic enrolment. The introduction of automatic enrolment will effectively create a substantial fresh inflow consisting of new members and providing contributions from both employees and their employers. Stakeholder pension schemes have already been set up all over the country but many of the funds have been virtually empty up until now. As a result of the introduction of automatic enrolment, they are about to receive a new lease of life.

Automatic enrolment will provide the missing ingredient that many stakeholder pension schemes have needed. With the introduction of automatic enrolment, the Government will finally be providing the missing catalyst for their widespread success. 

The Government intends to launch its new Personal Accounts regime in 2012. But the success of stakeholder schemes proves, in fact, there is an increasingly strong argument that the time, cost and complexity of Personal Accounts could be seen as just a waste as it is simply reinventing the existing stakeholder wheel. Stakeholder pensions are already providing a low-cost, flexible and secure option for people who do not already have access to a pension arrangement. Indeed, it was the Government that introduced them back in 2001 to actively encourage people to save for their retirement. And if Personal Accounts are introduced, there must at least be provision made to protect the existing good schemes and that there will be no detrimental effects for people who contribute to these existing schemes.

There is no doubt the introduction of automatic enrolment is a positive step, as it means people will automatically be contributing to a pension and I strongly believe in the right of all employees to have easy access to a high-quality pension scheme regardless of their income level. I am proud of the vital role B&CE has played for many years now in providing the opportunity of just that to hundreds of thousands of low to moderate earners in the construction industry. In my view, nothing should be done to delay the introduction of automatic enrolment. However, this need not necessarily be into Personal Accounts but into the more than adequate, existing low-cost pension schemes such as existing stakeholder schemes. Such schemes accept low-value contributions and have low annual management charges designed to meet administrative costs.

Stakeholder schemes have already been designed to make saving for retirement simple so why now create a costly new scheme when existing schemes and proven infrastructure is sitting there waiting to do the job and at similar charge levels? 

John Jory is deputy chief executive of B&CE Benefit Schemes