The Pension Quality Mark (PQM) is setting a tougher standard on the charges that people have to pay out of their pension pot by lowering its cap on charges from 1% to 0.75% of pot size per year.
This means that pension schemes applying for the benchmark must prove that all charges paid by savers in the default fund do not exceed 0.75% per year. This covers all fees, including annual management charges, as well as administration, contribution and consultancy charges.
The new cap applies to everyone in the scheme, whether or not they are active contributors. The change will be effective from 1 April 2013. The previous cap of 1% per year has been in place since PQM’s launch in September 2009.
The PQM estimates that someone who pays charges of 0.75% per year could end up with a pension pot of around 8% larger than someone paying annual management charges of 1% per year.
Chris Hitchen, PQM Chairman, said:
“Up to 11 million people will be auto-enrolled into a workplace pension, so we have to change defined contribution pensions for the better. We want to push fees down so that savers can enjoy better pensions. Charges can have a huge impact on people’s savings, and our tougher new standard is a big step in the right direction.
"Pension charges have decreased since the introduction of PQM, but we don't want these gains to be unravelled as auto-enrolment reaches medium and smaller-sized employers. These employers, and their workers, deserve information about what good defined contribution pensions look like, and that's what PQM provides.”
Schemes that already have PQM will have an extra two years on average to meet the new charges standard. PQM schemes that applied before 1 April 2013 need to comply with the standard by their first renewal after 1 October 2014.
Notes to editors:
- Over 170 pension schemes have qualified for PQM so far, covering around a third of a million active scheme members. It is a mark of excellence distinguishing pension schemes that are well run by employers, with good contribution rates, and clear communications to staff members.
- PQM was launched by the National Association of Pension Funds (NAPF) in September 2009. PepsiCo, The Guide Dogs for the Blind Association and Severn Trent are the latest schemes to receive PQM. They are joining leading organisations like the BBC, L’Oreal and Michelin that already have the standard.
- There are two standards, PQM and PQM PLUS. Under PQM, the scheme’s total contributions must equal at least 10% of an employee’s salary, with a minimum employer contribution of 6% of salary. Under PQM PLUS, the scheme’s total contributions must equal at least 15 per cent of an employee’s salary, with a minimum employer contribution of 10 per cent of salary.
- For further details on the Pension Quality Mark: http://www.pensionqualitymark.org.uk/
- The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
Paul Platt, Head of Media, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]