NAPF wants to stop schemes levelling down

The National Association of Pension Funds has attacked both the industry and pension commission’s models for personal accounts and warned the Government that the scheme could severely hit existing pensions if it is designed poorly.

In its submission on the Pensions White Paper, the NAPF says both models fail to achieve the best solution with regard to simplicity, choice and competition.

It says if it was forced to choose between the two options, it would support the Turner-inspired National Pension Savings Scheme as long as it includes effective governance, maintains strictly targeted intervention, limits damage to existing pensions and allows a diverse market of workplace pensions to thrive.

The NAPF supports the framework for reform that is set out in the Pensions White Paper but is concerned that a badly designed scheme could damage current savings levels.

To guard against this, the NAPF has published a five-point plan to reduce the risk of levelling down. It proposes a good workplace pension quality mark for employers offering schemes above the personal accounts minimum and meeting certain criteria.

It also calls for financial incentives for employers contributing at least 5 per cent, ringfencing personal accounts from existing provision by prohibiting transferring in and out, a “suitable alternative scheme test” and transitional measures to help employers adjust to the added costs of auto-enrolment.

NAPF chief executive designate Joanne Segars says: “We cannot sit by and see good quality schemes, in which millions of hard-working Britons are saving, levelling down in favour of personal accounts.”