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Frequently Asked Questions

1. What is the purpose of the PQM?

The Pension Quality Mark will help employers demonstrate the value of their pension scheme to staff and enable employees to appreciate the value of the benefits it offers. It will help:

1. promote good quality DC pensions;
2. employers attract and retain staff and benchmark their scheme against their competitors’ schemes;
3. employers encourage their employees to save for retirement;
4. employees understand and recognise the value of the pension their employer offers and improve confidence in pensions; and
5. combat the risk of some employers levelling down pension contributions when the new statutory minimum contribution comes into force in 2012.

2. Why is the NAPF introducing this scheme?

Promoting good quality pensions has always been an important part of the NAPF’s work.

In addition, the Pension Quality Mark will play an important part in rebuilding and promoting public confidence in workplace pensions.

3. How will the PQM make a difference?

The PQM is an important new initiative which will benefit both employers and employees. It is a simple benchmark that employers can use to demonstrate the value of their pension both to current and potential staff.

The PQM will also help employees to understand more about their employer's pension arrangements and compare the pension schemes of different employers.

4. How will the PQM benefit employees?

The PQM will help employees understand and recognise the value of the pension their employer offers and improve confidence in pensions. By doing this, it will encourage more employees to save for their retirement, which is becoming increasingly vital.

The PQM will improve the view employees have of their employers:

• Our research shows nearly two thirds (62%) of employees, with an opinion, would view their employer in a better light if the company’s pension scheme had an independent quality mark.

The PQM will make it more likely that an employee joins a pension scheme:

• Our research shows that over half of employees (52%) said an independent quality mark awarded to their company’s pension scheme would make it more likely that they would join.

5. How will the PQM benefit employers?

The PQM will help employers:

• attract and retain staff
• benchmark their scheme against those of their competitors
• encourage their employees to save for retirement
• boost the number of employees joining their pension scheme.

Employers who have received the award will be able to use the PQM logo in recruitment adverts, for example. The PQM will also allow workers to compare employers’ pension schemes.

NAPF research shows that:

• over two thirds (67%) of employees said that if they were looking for a new job, they would feel more favourable towards a potential employer if their pension scheme had an independent quality mark.
• nearly two thirds (62%) of employees, with an opinion, would view their employer in a better light if the company’s pension scheme had an independent quality mark.

6.Who supports the PQM?

The PQM has broad support from the pensions industry, employers, employee bodies, consumer organisations and regulators such as the Pensions Regulator.

Government backing was demonstrated by Angela Eagle MP, Minister of State at the Department of Work and Pensions, launching the scheme in September 2009.

The PQM also has public support. Our research shows that:

• Over half of employees (52%) said an independent quality mark awarded to their company’s pension scheme would make it more likely that they would join that scheme. This figure rises to 61% for those aged between 16 and 24.
• Nearly two thirds (62%) of employees, with an opinion, said that an independent quality mark would improve their view of their employer.
• Over two thirds (67%) of employees said that if they were looking for a new job, they would feel more favourable towards a potential employer if their pension scheme had an independent quality mark.

7. Which schemes can apply?

The PQM is available for any defined contribution pension scheme, whether occupational, group personal pension (GPP), stakeholder, and, from 2012, Personal Accounts.

8. Who can apply?

An application can be made by an employer, scheme manager, trustee chair, the secretary to the trustees or any adviser or consultant. Each application relates to one scheme and a specified employer.

9. Is the PQM available to non-NAPF members?

Yes. The PQM is available to any pension scheme that meets the qualifying criteria, whether they are a member of the NAPF or not.

10. How much does it cost to apply?

There is a one-off assessment fee of £250 and an annual license fee of £250 for smaller schemes (under 500 members) and £500 for larger schemes (over 500 members).

11. How long does the PQM last?

The PQM award has to be renewed annually. This acts as one form of quality assurance as each scheme will have to certify each year that its scheme still meets the qualifying criteria.

12. Why are defined benefit (DB) and hybrid pension schemes (HPS) not included?

As DC pension provision becomes increasingly widespread, there is a growing need for individuals to develop a better understanding of the DC pension offered to them by their employer. The NAPF therefore thought it made more sense to initially produce a PQM for DC pension schemes.

We hope to be able to launch a PQM for DB and HPS in the future.

13. What are the three core standards of the PQM?

Contributions of at least 10%, with a minimum employer contribution of 6% for the PQM. For the PQM PLUS overall contribution rates must be 15% including an employer contribution rate of 10% or more.

Governance arrangements must be in place to ensure the scheme is operating in the best interest of members.

Communications to members must be clear, engaging and easy-to understand.

A pension scheme or employer does not need to be a member of the NAPF to apply.

14. Why have you chosen contribution rates, governance and communications as the three core standards?

The three core standards that have been chosen are because they are the basic building blocks of a good quality pension scheme.

15. What quality assurances are there?

The primary means of verification will be a binding declaration by the scheme that it meets the core standards. This must be backed by the provision of supporting documents. The application and supporting documents will be thoroughly checked by the PQM’s staff before an award is given.

In addition, there are a number of other checks including:

1. Spot-checks on a randomly selected number of schemes per year;
2. Requests for additional information, where necessary;
3. Responding to any concerns about eligibility expressed by scheme members or employees representatives (whistle blowing).

16. Can the PQM be withdrawn (and how)?

Yes. There are a number of circumstances under which the PQM can be withdrawn. These include the scheme ceasing to meet the standards and the scheme being found to be in breach of regulations by the Pensions Regulator or the Financial Services Authority.

To continue to use the PQM after it had been withdrawn would mean the scheme was in breach of the terms and conditions.

17. Is PQM an insurance scheme? If my pension falls below expectations, can I claim compensation?

The PQM is not an insurance scheme. It does not comment on nor guarantee the schemes investment performance or the amount of pension received at retirement.

ABBREVIATIONS

DC - Refers to a defined contribution pension scheme organised through an employer. This is in the form of an occupational DC scheme, a Group Personal Pension or a Group Stakeholder Pension.

PQM – The Pension Quality Mark is awarded to DC pension schemes that meet three core standards relating to contribution rates, governance and communications.

PQM PLUS – The Pension Quality Mark PLUS is awarded to a pension scheme that has overall contribution rates of 15% including an employer contribution rate of 10% or more. It must also meet the governance and communication standards of the Pension Quality Mark.

DB – refers to a defined benefit pension scheme organised through an employer where the pension received is linked to final salary.

HBS – refers to a Hybrid pension scheme which is a cross between a DB and DC scheme.