Mercer has welcomed the Pensions Regulator’s (tPR) initiative to involve the pensions sector in a dialogue on six principles for good design and governance of workplace defined contribution (DC) pension provision. However, Mercer underlines the importance of bringing together existing principles and initiatives as there is scope for tremendous confusion for trustees and providers in trying to comply with all of them*.
Tony Pugh, European Head of DC Consulting at Mercer, commented: “Everyone agrees that obtaining good outcomes for DC members is critical to the success of the auto-enrolment concept and to safeguard the future wellbeing of private sector retirees. Failure to do this is an option that we should not contemplate, as it will be disastrous for future generations of pensioners. Unfortunately many DC schemes are already faltering, partly as a result of the economic climate but possibly also because of a loss of confidence in the DC sector.”
tPR has identified that work is needed both at the point of scheme establishment and also on a continuous basis, with the first three principles focusing on design and accountability aspects and the other three on administration, governance and member communication. “We are relieved that tPR is committed to working with the industry to understand its features before imposing any further opinions and guidelines,” said Mr Pugh. “tPR should also bear in mind that employers are critical stakeholders in the industry - after all the amount of contributions they are willing to pay will make the biggest impact on people’s retirement income.
“We all recognise that an auto-enrolment contribution of 3% from employers will not give pensioners an adequate income in retirement. The challenge lies in finding a level that is both adequate and that employers are willing and able to pay,” he concluded.
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