Memorandum submitted by IFDS (PE16)














IFDS and its affiliates have extensive pensions experience administering over 10 million participants in group schemes, primarily in the United States and Australia, and more recently in the United Kingdom.


IFDS believes that political consensus is important to ensure there is no debate over the appropriateness of saving in a pensions scheme.


Additionally, it is important to create an awareness of the scheme and promote a savings culture whilst encompassing five key tests of Personal Accounts: To promote responsibility, be fair, be simple, be affordable, be sustainable.





IFDS welcomes the publication of the Pensions Bill and is pleased to have the opportunity to share its expertise with policymakers whilst the Bill progresses through Parliament.


There are several issues in the Bill around which IFDS believes more clarity is needed. IFDS believes that flexibility in the scheme's design is important, whilst ensuring the scheme operates on a low cost system. This is best achieved through some flexibility, coupled with a sharp focus in key areas to enable a low-cost system to be designed to the correct specifications.


IFDS believes 2012 to be an achievable start date for Personal Accounts. Certainty as to the date of commencement will allow employers to plan effectively and aid the Government in producing an effective awareness campaign. Consumer understanding on timescales and scheme operating rules will be vital to the success of personal accounts, especially given the target market.





3.1 Clause 3/Clause 4: Automatic Enrolment


Subsection 6 of Clause 3 refers to the automatic enrolment date as the first date on which the jobholder is within the necessary age range. While the Bill indicates that the date of enrolment is the date on which the jobholder reaches the age of 22, Clause 4 suggests that this may be varied subject to regulation. It would be beneficial to understand the circumstances in which certain regulations would apply, as it is important that the Personal Accounts structure remains simple for the employer and the employee. It is important to the design that the variable circumstances are controlled to ensure that the Personal Account principles of low cost and simplicity are met.


3.3 Clause 7: Jobholder's right to opt out


Clause 7 establishes the right of a jobholder who has been automatically enrolled into an enrolment scheme to opt out of that membership by providing a signed notice. We would suggest that any such notice is provided to the relevant scheme administrator to avoid imposing a burden on the employer. The employee would also be less open to coercion to opt out by employers.


Given the reference in paragraph 7 (2) to the "prescribed period" we suggest that the Bill confirm that an employer is under no duty to effect a contribution for an automatically enrolled jobholder prior to the end of the prescribed period in respect of that jobholder. We believe this would minimise erroneous payments, thus minimising the overall administrative burden for both employers and scheme administrators. It would also provide simplicity for jobholders.



SERvice Levels


Additional clarification is required around the management of data for each individual saver. We need to ensure that there is easy recognition of each jobholder to avoid duplicating records if the jobholder has more than in a year and at the same time.



Management and Regualtory Information



4.1 Clause 10: Introduction of employers' duties


This Clause allows the Secretary of State to set the regulations that require some employers to start discharging their duties before other employers. This implies a phased introduction and not a 'big bang' introduction as previously documented. Any such 'phased introduction' will have implications on contributions in the initial years of Personal Accounts in operation and therefore to the costs of establishing the scheme.


4.2 Clause 39: Monitoring of employers' payments to personal pension schemes


Additional clarification is needed about monitoring arrangements surrounding employer contributions to personal account schemes in respect of an employee. We understand Clause 39 to confirm this as an employer responsibility. In our view this would constitute an appropriate burden on the employer. We would be grateful for clarification on who would be required to monitor the value of employer contributions. The administrator monitoring the value of employer contributions will add complexity and cost to the scheme.




Personal Accounts

The Bill notes various aspects of scheme design intended to be progressed through regulation. It may be that certain items should be considered for direct inclusion in the Bill.

Clarification is required around ensuring that the Financial Service Authority's (FSA's) principles for treating customers fairly (TCF) are consistently applied. These principles will be appropriate in various circumstances such as jobholders opting out of the scheme and the dates of collection.


January 2008