PQM gets ready for auto-enrolment with new standard on charges
The Pension Quality Mark (PQM) is adapting to changes sparked by auto-enrolment by setting up a new standard for pension schemes that use new types of charge.
Previously, only defined contribution (DC) pension schemes that used annual management charges (AMCs) were able to apply for PQM. The new standard continues to require that a scheme’s charges total 1% or less for both active and deferred members, but opens the Mark up to schemes that have different arrangements, such as flat-rate charges or contribution charges.
To receive the PQM, such schemes will have to demonstrate that their charges are better than or equal to a 1% AMC for scheme members on half average earnings (£13,000 a year). This will ensure scheme charges are good value for people on lower incomes.
To date, 152 pension schemes covering 300,000 active scheme members have been awarded the PQM. The Mark recognises pension schemes that have high standards of governance and communications and contributions.
Chris Hitchen, PQM Chairman, said:
“Auto-enrolment will start unfolding in a few months and will change the UK’s pensions landscape for the better by extending pension provision to millions of working people.
“Auto-enrolment will also change the way pensions are provided with new types of schemes and new types of charging structures.
“Today’s announcement ensures that PQM keeps pace with developments in the pensions market whilst maintaining a focus on low charges and value for money. This will be an essential ingredient in re-building public confidence in pensions.”
The new standard comes into effect today.
PQM was launched by the National Association of Pension Funds (NAPF) in September 2009.
AIMA, Mentor Graphics and Wavin are the latest schemes to be awarded the PQM. They are joining top brands like Volkswagen, L’Oreal and Michelin that already have the standard. There are two standards, PQM and PQM PLUS.
PQM recognises DC pension schemes with good governance and communications, and with a total contribution of 10% (with at least 6% from the employer). PQM PLUS recognises DC schemes with good governance and communications, and with a total contribution of 15% (with at least 10% from the employer).