· 2 min read · Features

The Pensions Quality Mark should restore staff confidence in pensions and encourage bigger savings


The Government continues to drive its 2012 Personal Accounts legislation forward, with the aim of auto-enrolling every employee in the country into a workplace pension. In response to this, we are beginning to see a number of organisations whose schemes already exceed the statutory minimum requirements, and that would like to look for ways to communicate the quality of their workplace pension provision.

The introduction by the National Association of Pension Funds (NAPF) of a recognised Pension Quality Mark (PQM) is designed to promote good quality defined-contribution workplace pension schemes.  To be implemented in the autumn, the PQM will focus on three core aspects of good pension provision: pension contributions, governance and communications.

Those organisations that meet the established criteria will be able to promote their workplace pension using the PQM logo within their communications, including their recruitment adverts, staff handbooks and website. The PQM is intended to demonstrate that the pension scheme has been externally recognised for its quality. This is turn should give employers a competitive edge and enable them to demonstrate their commitment to their staff in a way similar to other recognised marks such as Investors in People.
Furthermore, the PQM is designed to combat the risk of workplace pensions levelling down to the new statutory minimum in 2012 - unlike the total 8% contribution that employers and employees will need to make from 2012 to meet the Government's requirements, the PQM will require at least a 10% contribution (with a minimum 6% being made by the employer).  Those organisations that go even further and contribute a total of 15% or more (with at least 10% from the employer) will be eligible for the PQM Plus.

The PQM will be important in the post-2012 landscape, and I envisage employers seeking to differentiate their schemes from the one-size -fits-all solution that will leave many of the more vulnerable sections of the workforce without access to the advice they need, and - as a result - continuing to contribute far too little to their pensions.
The simple fact is that for the vast majority of people the 8% contribution level the Personal Accounts scheme seems to propose is far too little to save. Without the provision of ongoing financial advice there is a danger that many people will simply take this option and give it no more thought, only to discover too late that they have not made enough provision.

The PQM is an important step in recognising those employers that are actively supporting their workforce with sound pension planning and ultimately helping them to secure a better standard of living in retirement. My fear is that the 2012 proposals alone are not sufficient to solve the pensions crisis and furthermore they could leave a number of savers very poorly prepared for their retirement.
Foster Denovo recently carried out a piece of research with YouGov which highlighted that 25% of adults surveyed across Great Britain believed they would need to work to the age of 70. Sadly this is not always practical for a variety of reasons and without the proper provision in place many people will find themselves in severe financial difficulty.
To conclude, I believe that employers will increasingly look to demonstrate that they have exceeded this base level of provision, and that they value their employees' futures. Moreover, a recognised quality mark may help to restore employees' confidence in pensions and encourage them to engage more readily.

Ian Bird is principal partner at Foster Denovo