In total, the authority received 45 written responses to the consultation, as well as collecting views from two public events and a series of smaller meetings. Respondents included industry bodies, pension scheme providers, consumer groups, financial advisers and consultants. The responses broadly addressed the questions raised in the consultation paper. Key points emerged, which we will use going forward to develop the scheme.
There was an acknowledgement that a lifetime annuity (or, where relevant, trivial commutation) is likely to be the most appropriate option for personal accounts members. Accessible language and simple communications were cited as a requirement.
Although the personal accounts scheme is anticipated to be primarily e-business, respondents highlighted the need for other channels such as a helpline for members, at least for part of the retirement process. In addition to this, there was a general recognition that a panel of providers approach could be the most appropriate route for members not wishing to exercise the open market option.
Comments also looked at fund sizes, which are likely to be very small in the early years. This was acknowledged as presenting a number of challenges to the scheme and the wider retirement income market.
Some respondents commented on other matters that were not addressed in the consultation paper, such as benefits in respect of members in ill-health or serious ill-health. Benefits like these will be catered for in the draft scheme order and rules, published for consultation on April 28, 2009.
Elsewhere, PADA launched its investment discussion paper earlier this month, which is another highly important piece of work.
Getting the scheme’s investment objectives right will go a long way to ensuring members and employers have confidence in the personal accounts scheme. The design of the investment objective needs to be matched to our members’ characteristics and aspirations and, most importantly, be consistent with delivering a low-charge, value-for-money scheme.
We are clear that one of the aims of the personal accounts scheme is to increase the level of private pension saving among those who have had limited or no engagement with pensions. The trustee corporation will make the final decision on the investment strategy and will, therefore, need to consider how the investment objective reflects the need to produce consistent outcomes for such a diverse membership, to engender confidence in saving for the long term.
The trustee corporation will need to build member confidence in the benefits of saving for the long term to ensure that savings persistency rates remain high. Persistent contributions over as many years as possible are essential for members to achieve a suitable pension pot in retirement. As with previous consultations, we ask for all those with relevant evidence and ideas to please respond so that we can create the best scheme for our future members.
