Paving the road to hell

Neil Copeland

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Baldrick has clearly taken up employment with the NAPF. They have come up with a plan (see – Pension schemes to face ‘quality mark’ test) which is as cunning as a fox who’s just been appointed Professor of Cunning at Oxford University but has moved on and is now working for the U.N. at the High Commission of International Cunning Planning. As good old Balders himself might have said.

And the cunning plan is? A quality mark plus for pensions!!

So the message to is:-

  • Employer paying 10% – Good!
  • Employer paying 6% – Okay!
  • Employer paying less than 6% – not worth bothering with!

It’s a good job they’re bringing in auto enrolment for personal accounts!!

And the really cunning bit is that they are suggesting that schemes can self-certify their compliance. I think mortgage brokers had an equally cunning plan once.

The industry has to recognise that it has a problem with trust. As reported in the press, pension schemes have suffered problem after problem, whether DB or DC. Maxwell, Equitable Life, closing final salary schemes, plummeting DC asset values.  The article notes that 3.7m employees are in DC Schemes against 2.7m in DB Schemes. But this pales into insignificance against the number who are making no pension provision at all (See Daily Express – UK Facing Pension Crisis).

Sticking a tick box derived quality mark on a relatively small number of self congratulatory schemes is not the way to rebuild trust. We need to design solutions that encourage people to make some level of pension provision and that also encourage employers to help them. We also need to ensure the state system does not disincentivise modest provision. Any provision should be better than none.

We also need genuine simplification – can someone ensure that, next time round, HMRC has access to a proper dictionary?

In the current climate many employers are struggling. My concern is that the NAPF quality mark, however well intentioned, will result in both members and employers concluding that, if they can’t meet the 4% and 6% contribution levels required, then they might as well not bother. It does rather reinforce the view that the NAPF is dominated by larger employers and consultancies and is out of touch with the smaller and medium sized enterprises struggling to keep their heads above water.

The Government’s proposals for personal accounts are flawed but are at least a start and remove many of the barriers to entry that currently exist.

Finally, if the NAPF is going to have policy developed by a fictional comic character it’s a pity it opted for Baldrick rather than Homer Simpson. Homer’s policy might not have extended much beyond free access to donuts, beer and chilli, but at least the resultant damage would be easily contained.

Neil Copeland

Post by Neil Copeland

Director, pensions consultant and adviser to trustees and employers on all aspects of work based pension schemes.