Seal of approval

The hunt is on for the UK’s best defined contribution (DC) workplace pension schemes following the launch of the NAPF’s Pension Quality Mark (PQM). With 13 schemes gaining the award, a great start has already been made. 

The Pension Quality Mark is awarded to well managed schemes with high levels of contributions and good member communications. For the first-time employers who offer a quality DC pension scheme will be able to get independent recognition of their scheme and employees will have an independent standard to guide them.

The PQM will help employers demonstrate the value of their pension scheme. Our research shows that the PQM will help employers to recruit and retain staff. Earlier this year the NAPF asked employees what they thought about the idea of an independent quality mark for pensions. Over half (52%) said they would be more likely to join a pension scheme if it had such a mark. Also, over two thirds (67%) said that if they were looking for a new job, they would feel more favourable towards a potential employer if their pension scheme had an independent quality mark. 

Moreover, the PQM will help scheme members and future employees to recognise that the pension they are being offered is a good one. This should increase employee trust and confidence in their workplace pension, a crucial factor in itself. 

The PQM has also been designed to combat the risk of levelling down when personal accounts are introduced in 2012. The NAPF has long argued that the introduction of personal accounts must not adversely affect existing good quality pension schemes. The PQM will play a key part in ensuring that this does not happen by demonstrating the value of higher contribution levels.

Application

Any type of workplace DC pension scheme can apply for the PQM, including occupational (trust-based) schemes, group personal pensions and group stakeholders. To qualify for the PQM, schemes must meet three core standards of good pension provision: 

• Contributions must total at least 10% of earnings, with a minimum of 6% contributions from the employer. There is a PQM PLUS award for those with even higher contributions – 15% total, with 10% from the employer. All contribution arrangements are recognised, including age-related, matching, fixed, non-contributory and salary sacrifice.

• Governance standards are designed to ensure schemes are well run and meet the needs of members. Different governance arrangements are recognised (trustees, management committees and stand-alone annual scheme reviews). There are also standards on charges and on the help that members get with choosing investment options.

• Communications which provide employees with clear and engaging communications at all stages from joining the scheme to approaching retirement. 

Employers and schemes receiving the PQM will be able to use the PQM logo on their documentation and websites, which will visually demonstrate that the pension scheme has been recognised for its quality by an independent body. PQM awardees will also have preferential access to the NAPF’s PENSIONSFORCE programme, which provides free group presentations to engage employees with their pension and financial planning.

At the time of the launch over 100 employers had registered an interest in the PQM. We believe there are many hundreds more that meet the PQM standard, so we are urging employers, advisers and consultants to help us unearth more quality schemes and help them or their clients get the recognition they deserve for running an excellent DC scheme. We believe the PQM will help:

• attract and retain high calibre employees;

• ensure employees have confidence in the pension scheme;

• encourage employees to save for a comfortable retirement;

• benchmark the scheme against competitors.

The award has received support from the pensions industry, employers, employee bodies, consumer organisations and The Pensions Regulator.

So, if you know of a good DC pension scheme – don’t keep it a secret!