Personal Accounts - An introduction to new government pension reform |
|
|
|
|
Q
- What are the
KEY FACTS behind Personal Accounts ?
What is a personal account?
A personal account will be a workplace pension. The personal accounts scheme is intended to complement existing workplace pension provision.
The personal accounts scheme will be:
-
a trust-based occupational pension scheme
-
one of the automatic enrolment schemes under the Government’s reforms. Personal accounts will be regulated by the Pensions Regulator
-
open to any employer that wants to use it. Like any other automatic enrolment scheme, employers can offer more than the minimum requirements through the personal accounts scheme
-
run on a not-for-profit basis by a Trustee Corporation in the interests of its members
-
simple and low cost
-
ready for the onset of employer duties in 2012.
|
Information
provided by the Personal Accounts Delivery Authority
|
Q
- What is the
TIMELINE of Personal Accounts ?
Timeline 2008/9 - dates are indicative only
November 2008: Royal Assent of the Pensions Bill 2007 created the Pensions Act 2008.
December 2008: PADA’s Decumulation consultation: Securing a retirement income published.
January 2009: PADA starts procurement for the personal accounts scheme (administration).
January 2009: PADA consultation process on the approach to Investment strategy for the personal accounts scheme starts with a Responsible Investing and Socially Responsible Investing event.
March 2009: PADA’s Investment strategy consultation paper published.
March 2009: PADA’s Scheme Order and Rules consultation jointly with DWP (the personal accounts equivalent to the Trust Deed).
Spring 2009: Regulations consultation (Pack one) – the detailed employer duties.
Autumn 2009: Regulations consultation (Pack two) – the detailed employer duties. |
Information
provided by the Personal Accounts Delivery Authority
|
|
Q
- How will Personal Accounts
WORK ?
We envisage that personal accounts will be primarily e-based, for example:
the provision of information will generally be through e-channels, which could include the internet, email, SMS, telephone IVR, and future digital platforms. We believe this enables easy access to information and better allows us to provide information in a timely and accurate way.
Processes will be automated where possible to deliver faster responses to users and to avoid errors and re-work.
There will be non ‘e’ services where appropriate – for example, for complex services that don’t easily fit an e-model, and for members who can’t use digital channels.
|
Information
provided by the Personal Accounts Delivery Authority
|
|
Q
- Will there be any
SPECIAL FEATURES ?
1. The scheme will be open to any employer that wishes to use it to fulfil their employer duties from 2012.
2. To help ensure we stay focused on our target market (low to middle earners who currently don’t participate in a workplace pension) there will be an annual contribution limit for personal accounts members
-
the contribution limit for personal accounts is £3,600 at 2005 levels
-
an 8 per cent contribution for an average earner (approx £23,700) would be approximately £1,900 per annum, leaving ample headroom for additional contributions.
3. There is a ban on transfers in and out of the scheme (except in some special circumstances, such as at retirement).
|
Information
provided by the Personal Accounts Delivery Authority
|
Q
- What
MYTHS and
REALITY currently surround Personal Accounts?
MYTH:
The personal accounts scheme will compete with existing pension schemes.
Reality:
The personal accounts scheme is being designed to complement existing workplace pension provision. Rather than diminishing the current market for pensions, the reform programme, including the personal accounts scheme, will be increasing access to workplace pensions.
MYTH:
Workers will be automatically enrolled into personal accounts.
Reality:
Under the Pensions Act 2008 employers will be required to enrol eligible employees into a good quality workplace pension. Personal accounts will be one of the schemes on offer to employers. It will be up to employers to select suitable schemes for their workers. This may mean using existing schemes, setting up a new one or using personal accounts.
MYTH:
“Automatic enrolment” means employers no longer have the freedom to choose the best pension scheme for their workers.
Reality:
Employers can choose the scheme they believe is most appropriate for their employees. However, the new duties mean that there are minimum requirements for workplace pension provision. Auto-enrolment is designed to make it easy and attractive for individuals to participate in pensions saving; however individuals will be able to opt out.
MYTH:
The government’s minimum requirements for automatic enrolment schemes are the “personal accounts” requirements
Reality:
Employers can offer more than the minimum requirements. There is no reason why personal accounts, or any other occupational scheme, can’t provide pension products that allow employers to offer more than the minimum requirements – for example, first £ contributions.
MYTH:
The delivery authority is building an IT system to deliver the personal accounts scheme
Reality:
Once established, the personal accounts scheme will be one of the largest pension schemes in the world which will, for the majority of its services, be an e-business. However, PADA will not be building an IT system. Rather, we will be procuring business services from leading industry suppliers.
MYTH:
Personal accounts will be administered purely online
Reality:
PADA is developing an e-business model for the personal accounts scheme. This potentially includes online and other digital channels. We are building a pension scheme for the future that will be low cost; that minimises employer administrative burden; and is simple for members and employers to use. There will be non ‘e’ services where appropriate - for example, for complex services that don’t easily fit an e-model, and for members who can’t use digital channels.
MYTH:
The annual contribution limit of £3,600 will deter potential members
Reality:
The annual contribution limit as it stands aims to focus the personal accounts scheme on its target market. An 8% contribution for an average earner (approx £23,700) would be approximately £1,900 per annum, leaving ample headroom for additional contributions. The government is committed to reviewing the annual contribution limit (and the ban on transfers) in 2017.
MYTH:
Financial turmoil and the size of the scheme means PADA will not hit its deadline of 2012 for delivering the personal accounts scheme.
Reality:
The recent financial turmoil is not expected to have an impact on the implementation of the scheme. Pensions are a long-term investment. The position of the financial markets is likely to change many times between now and when the personal accounts scheme is introduced, and beyond. PADA is confident that it has a credible set of plans that will enable introduction in time for the onset of employer duties in 2012. We have thoroughly reviewed our plans and have a path to delivery, which (though tight) is absolutely consistent with this date.
MYTH:
The personal accounts scheme is a government pension scheme.
Reality:
The personal accounts scheme will be an independent pension scheme run by a Trustee Corporation in the interests of its members. |
Information
provided by the Personal Accounts Delivery Authority
|
 |
The
Senior Pensions Adviser at Standard
Life has provided information following your questions
and now we are putting your questions
directly to PADA! If you have a
question... Click
Here
|
|
|
|
|
|
Back
to Top
|
 |
|
Disclaimer
- This is the current understanding of a Personal
Account by Personal Accounts Ltd. This is not
intended as any form of advice and no responsibility
is taken for its contents. All parties should seek
their own legal & financial advice regarding all
aspects of Financial advice from a suitably qualified
source.
Tax and legislation are likely to change. The
information provided here is based on Personal
Accounts Ltd understanding of law and HM Revenue &
Customs practice at date of publication
and the legislation we believe will apply from 6
April 2012. Personal Accounts Ltd accepts no
responsibility for advice that may be formulated on
the basis of this information.
Company Registration No. 03224565. Registered
Address: 9 Beachampton Business Park, Milton Keynes.
MK19 6EA |
|
|
|
Personal Accounts © Copyright
2009 - Personal Accounts Ltd - All Rights Reserved - Links
page
|
|
|