Contribution levels is the missing pillar within the government's call for evidence on DC scheme standards.
Along with the consultancy charging ban and fees cap, and the Office of Fair Trading’s investigation of the workplace pensions market, this represents the sunnier side of the government’s strategy to ensure new savers brought through auto-enrolment get value for money.
“There is a role for legislative minimum standards in guaranteeing a certain level of quality without affecting the diversity in the market,” the call for evidence states.
It focuses on three factors that influence the size of a saver’s final retirement savings pot: scheme governance; investment and default options; and administration and record-keeping.
While we encourage employers and individuals to consider whether to pay more than the 8 per cent minimum, we have no plans to change this standard at this stage
These are all important areas, particularly the prospect of minimum governance structures, the discussion of what constitutes a suitable default, and checks that money is going where savers want it to. But it doesn’t take a genius (which is handy) to work out the missing, most important factor that influences a member’s final retirement pot.
“While we encourage employers and individuals to consider whether to pay more than the 8 per cent minimum, we have no plans to change this standard at this stage,” the document paper continues.
Back in March the OECD’s principal economist told Pensions Week that contributions “had to be higher” to stop people reaching their planned retirement age and being shocked by the buying power of their savings.
Who is going to tell the DC scheme member the auto-enrolment minimum contributions are not enough? The government does not want to sully its own reform, or by increasing contributions add burden to struggling employers. Nor is there anything in it for providers to dwell on auto-enrolment’s dirty secret.
Aside from the reach of the National Association of Pension Fund’s Pension Quality Mark, it is difficult to see where greater pressure for higher contributions is going to come from.
If anyone has any ideas, do tweet us, comment in our LinkedIn group, or send through an old-fashioned letter. Quality schemes deserve decent contributions.
Ian Smith is editor of Pensions Week. You can follow him on Twitter@iankmsmith and the team @pensionsweek
