'Star ratings' plan for pensions

Steve WebbPension schemes could be given "star ratings" and charges will become clearer under Government proposals to help reverse nearly half a century of declining membership.

The range of ideas to rebuild people's confidence in pension saving also includes a type of pension called a "defined ambition" (DA) scheme, which would see risks shared more equally between workers and their employers.
The Government wants to see how the pensions industry can be encouraged to develop more innovative products and bring a greater choice of them to market.

The Department for Work and Pensions' (DWP) paper, titled Reinvigorating Workplace Pensions, said that the introduction of automatic enrolment last month, which will eventually see up to 10 million people placed into workplace pensions, means it is vital to make sure schemes demonstrate good value.

The Government said it is exploring the idea of a "star rating" system for schemes across the industry which could include charges, good governance and transparency. It will monitor charges as automatic enrolment is rolled out and said that they could be capped if such action becomes necessary.

One idea put forward to encourage people to save more than just the minimum level of pension contributions, which may not be enough to give them a comfortable retirement, would be to automatically increase their contribution rates when they get a pay rise.

The Government said it is also keen to work with the industry to look at whether a small number of larger scale, multi-employer pension schemes might offer value for money. It said countries like Australia have collective occupational pension funds.

According to official figures, active membership of occupational schemes have declined from a peak of 12.2 million people in 1967 to 8.2 million by 2011.

Steve Webb, Minister for Pensions, said: "Automatic enrolment is a huge step forward, but it's only the start; we must ensure people are saving in high-quality, value-for-money pension schemes. For nearly half a century, we have seen declining numbers of people in workplace schemes - I am determined to reverse this trend and ensure we have pensions that are affordable to employers and attractive to employees."

TUC general secretary Brendan Barber said: "This new initiative shows the Government is serious about improving workplace pensions. The TUC has always considered auto-enrolment to be the first step towards wider reform on pension provision, and we're glad the Government agrees with us."
Read Full Story