Product category:
Pensions and retirement
News Release from: Standard Life Bank | Subject: Pensions Bill
Edited by the Insidemoneytalk Editorial
Team on 07 December 2007
Pensions Bill - Conflict of interest in
PADA's powers confirmed
In November, following evidence given to a select committee hearing,
Standard Life pointed out that there was a potential conflict of interest in the role of the Personal Accounts Delivery Authority (see e-mail reproduced below) The Pensions Bill will effectively write this conflict of interest into legislation if enacted as stands
This article was originally published on Insidemoneytalk on 7 Dec 2007 at 8.00am (UK)
Related stories
The Pensions Bill published today will remove the requirement for employers
to designate a stakeholder pension scheme.
The Government issued the Pensions Bill today
which contains the detail needed to bring Personal Accounts into force from 2012.
Part 1, Chapter 5, Section 61, paragraph 2(b) confirms that PADA will give assistance and advice to the Secretary of State in connection with Part 1, Chapter 1 of the Bill.
Chapter 1 contains the exemption conditions for good schemes.
www.publications.parliament.uk/pa/cm200708/cmbills/025/2008025.pdf Although PADA will be operating personal accounts, a direct competitor of good existing pension schemes, PADA will be allowed to set the test by which good schemes become exempt.
Further reading
Pensions Bill - ?50,000 penalty for employers who ignore personal accounts
The personal accounts legislation is being introduced through Parliament in the Pensions Bill which was issued today.
Pensions Bill - ?4.4 billion to be slashed from pension benefits of early leavers
The Government has today issued the Pensions Bill which takes forward changes to the private pensions regulatory framework.
Pensions Bill - breaking views - Almost impossible to comply with good scheme opt-out
The Pensions Bill published yesterday contains provisions for the opt-out of good existing schemes.
There are some mitigating provisions in Part 1, Chapter 5, Section 62 which say that PADA should encourage participation and attempt to "minimise" the impact on good schemes, but these provisions are highly subjective e.g "participation...should be encouraged" , ";adverse effects...should be minimised", ";preferences of members...should be taken into account".
None of these principles is made measurable by targets.
John Lawson, Head of Pensions Policy at Standard Life said, "This is a clear conflict of interest.
Suspicions were raised when Paul Myners gave evidence to the Work and Pensions Select Committee on 17th October - these suspicions are now confirmed by plans to turn this conflict of interest into law.
If PADA is to have a duty of good faith towards existing schemes, where are the targets? For example, should PADA have a target to ensure that over 90% of good schemes remain in place after 2012?" E-MAIL ISSUED ON 5th November 2007: Dear All, We have obtained a copy of Paul Myners speech at the recent NAPF conference.
This includes the passage that refers to the exemption test for good schemes: "However we need to be clear what we mean when we refer to excellent personal pensions.
My own view is that this definition should include good standards of governance, an appropriate range of investment options (including a sensible default option) and low charges as well as the generosity of the employer's contribution to the scheme.
Contribution levels are an important but not only criteria to have in mind in defining excellent." The recent Work and Pensions Select Commitee hearing (uncorrected evidence here: http://www.publications.parliament.uk/pa/cm200607/cmselect/cmworpen/uc1069-i/uc106902.htm) includes the following response by Paul Myners to a question about the progress PADA is expected to make: !;I would expect usto have worked with others to address the issues around auto-enrolment for our private sector providers in this area, issues raised by the Direct Marketing Directive and the Unfair Commercial Practices Directive, which are yet to be resolved and we will have worked with others in providing advice which will frame their decisions around enforcement." Both of these comments suggests that PADA will at very least be responsible for advising the Government about the exemption test for good schemes.
PADA will also set up and run personal accounts (once it becomes an executive delivery authority).
Personal accounts are a direct competitor of existing good schemes.
It looks like PADA is effectively being allowed to dictate the terms upon which personal pension and stakeholder schemes will be allowed to compete with personal accounts e.g that personal pension and stakeholder schemes must be "excellent"t; have "an appropriate range of investment options"; and "low charges" .
If PADA is involved in the decision over the exemption test in any way at all, then this is an obvious conflict of interest.
John Lawson, Head of Pensions Policy at Standard Life said, "This is clearly a conflict of interest.
This is like Manchester United being able to dictate, in the Premiership decider with Arsenal, that Arsenal should play with 9 men and defend a goal that is 6 feet wider than theirs.
The Government should clarify the role of PADA in the decision over the exemption test for good schemes immediately.".
• Standard Life Bank: contact details and other news
• Email this article to a colleague
• Insidemoneytalk Home Page
