Speaking at the TISA Retirement Savings Challenge conference on board the HQS Wellington yesterday, Jones said schemes that choose this option would have to ensure at the end of the year that minimum contributions were reached.
He said: “Qualifying earnings need not be the only way personal accounts offers a product. We may well offer a basic pay product with some check against your adherence to minimum you have got to put in but there is nothing to stop us as a scheme offering a basic pay product.”
The industry has been calling for qualifying earnings to be based on basic pay rather than total pay, including bonuses and overtime, for sometime. Many believe forcing employers currently using basic pay to calculate contributions would result in widespread leveling down.
Legal & General wealth policy director Adrian Boulding says Jones may be reacting to moves by insurance companies to introduce a similar option for group personal pensions.
He says: “I think Tim has woken up to the fact that us and other insurers will be offering this catch up option for our group personal pensions because most existing schemes use basic pay. He is reacting to that and will copy it by the sounds of it because personal accounts will be competing with the private sector.”
Jones also announced that Pada would begin tender process with potential scheme administrators in January but it would take “the thick end of 18 months” for the authority to come to a decision. He is believed, however, to be in close talks with half a dozen possible partners already.