A new scheme aimed at improving company pension schemes and making them attractive to employees has been launched.

The National Association of Pension Funds (NAPF), which represents around 1,200 funds in the UK, will award a Pension Quality Mark to employers who meet a set of minimum standards, including having a minimum employer contribution rate of 6%.

The move is designed to help workers better assess the quality of their employer’s pension scheme, as well as to improve the schemes on offer and increase take-up.

In what is a tough climate for pensions, nine out of 10 companies have now replaced their final salary pension schemes to new joiners and replaced them with less generous defined contribution versions.

With this type of scheme, the eventual pension depends on how much cash the employee has invested over the years and the return that this has made, and bears no direct correlation with the number of years for which members have been contributing or their final salary at retirement.

But there are concerns that employers are contributing far less to these schemes than to the final salary pension schemes they ran previously, while pension schemes vary massively across the private sector.

The qualify for the new Pension Quality Mark a scheme must have contributions of 10% or more, of which at least 6% must be contributed by the employer. Firms must also prove that the scheme is being run with the best interests of their employees in mind, with administration and fund management charges limited to 1% of the main funds, and they must set out the terms of the scheme to members in a way that is transparent, engaging and easy-to-understand.

There is a one-off assessment fee of £250 and a £250 annual licence fee (£500 annual fee for larger schemes).

Among those companies receiving the first awards are Marks & Spencer, Accenture, IBM, Standard Life and the Royal College of Physicians.

NAPF chief executive Joanne Segars said that the not-for-profit award was created to applaud employers for high quality schemes and allow employees to “navigate through the pension maze”.

“It shows these employers’ commitment to encouraging their staff to save for retirement, which is becoming ever more vital,” she said.

She hopes to award the quality mark to at least 100 schemes in the next year.

Doug Taylor, from the consumers’ association Which?, said that providing a benchmark could help people “judge the quality of the pension scheme offered”.

“Companies will be able to easily promote that aspect of their employment package,” he added.

This entry was posted on Monday, September 21st, 2009 at 11:04 am and is filed under Investing, Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.