Pension Quality Mark enhances standards with benchmark for default funds | Pensions and Lifetime Savings Association

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Pension Quality Mark enhances standards with benchmark for default funds

02 May 2014

Pension Quality Mark, a standard recognising high quality defined contribution (DC) pension schemes, has reinforced the requirements for default investment strategies in its revised standards document published today.

The new investment standard, which is part of the governance section of the PQM principles, outlines the good practice processes pension schemes must follow when setting, monitoring and reviewing the default fund’s investment objectives.

The revised standards also require documented objectives of the default investment strategy, plus regular monitoring and formal review by trustees, governance committee or through the company’s own annual scheme review, every three years or more.

Commenting, Justine Tate, Managing Director of the PQM, said:
 “Pension Quality Mark exists to shine a light on good quality pension schemes and help raise the standard of defined contribution schemes available to employees. Approximately 80 to 90% of DC pension scheme members are in the default fund and it is crucial that the default investment funds’ investment strategy is sound.

“There are three key factors that make the biggest difference to the size of the retirement pot: good contributions, low member charges and a properly monitored investment strategy─ PQM makes sure all three are in place.”

In March the Government introduced a 0.75% charge cap for DC default investment funds, matching PQM’s existing 0.75% charge cap.

Commenting Tate said: “Since PQM launched in 2009 it has already made a positive impact and led the way on good practice in schemes by setting a 0.75% charge cap. We were also the first organisation to set standards for governance committees, ensuring proper representation of members’ interests in contract-based schemes.

“Schemes that hold the PQM should feel proud they were among the first schemes in the UK to have met these standards, leading the charge in the provision of good quality DC pension schemes.”

DC schemes looking to gain the independently assessed Pension Quality Mark will need to demonstrate that they meet the strict criteria for contributions, governance and communications, including the new enhanced governance principles.

Schemes that have already been awarded the PQM will have until their first renewal after April 2016 to meet the new default investment strategy standard.

ENDS

 

Notes to editors:

PQM was launched in 2009 and is wholly owned by the National Association of Pension Funds (NAPF). PQM is a standard that recognises high quality DC pension schemes. It is designed to raise confidence in workplace pensions, helping employers demonstrate that their scheme is good quality.
PQM has been given to around 200 pension schemes, and covers a third of a million active scheme members. There are two standards, PQM and PQM PLUS:
Under PQM, the scheme’s total contributions must equal at least 10% of an employee’s pensionable salary, with a minimum employer contribution of 6%.
Under PQM PLUS, the scheme’s total contributions must equal at least 15%, with a minimum employer contribution of 10%.
PQM READY was launched in February 2013 and aims to help employers spot a good multi-employer pension scheme or mastertrust. Further information about the Pension Quality Mark can be found at
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.

Contacts:

NAPF media enquiries should be directed to:

Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]

Eleanor Bennett, Press Officer, 020 7601 1718 or 07825 171 446, [email protected]