Personal Accounts: DWP Executive Summary
Section 7: A delivery authority to support reform

They would have to guarantee that even if Governments change, it will still be there and it won’t be null and void after four years.”(35-49, £15-30k)⁴⁴

108. People need confidence that their money is being managed responsibly and that members’ interests are at the heart of the organisation. Managing a major new occupational pension scheme is not a job for government. For this reason we have proposed setting up a delivery authority in the Pensions Bill currently before Parliament.
109. The wealth of expertise in business and financial services is in the private sector. Stakeholders across industry, employers and consumer representatives all agree that harnessing the skills of the private sector to deliver personal accounts within a framework set by government is the best way to build credibility and public confidence. We therefore propose to bring in leading experts from the private sector to help develop, deliver and manage the personal accounts scheme.
110. Initially, the delivery authority will act in an advisory capacity on the detailed design of personal accounts and on the commercial and procurement strategies.
111. We will build on this structure, expanding the remit of the delivery authority and providing it with the necessary independence and powers to establish personal accounts. In addition the delivery authority will need to look at both the charging structure and investment strategies that are to be put in place; neither are areas where government has expertise. It will be vital to ensure that investment strategies are independent from politicians and pressure groups and that they are developed with members’ interests at their heart. The delivery authority will be replaced by the personal accounts board which will then be responsible for the live running of the scheme.
112. It will be the Government’s role to lay down the remit for the delivery authority and personal accounts board to ensure that personal accounts can and do deliver the objectives of the reform. The remit is expected to include:

     • achieving optimal participation rates among the target group;
     • achieving low charges and costs;
     • encouraging additional contributions above the minimum 8 per cent level;
     • ensuring high levels of customer service;
     • a duty to act transparently and adopt a consultative culture;
     • setting an investment strategy in the best interest of members;
     • providing appropriate degrees of consumer protection; and
     • minimising impact on other good pension provision and employers more generally.

113. Members’ needs must remain at the heart of personal accounts. As a minimum, the personal accounts board will be required to be open and consultative in its approach to making decisions. For example, we would expect the board to consult on its approach to ethical funds and to shape the funds that are available in accordance with members’ wishes. Consultation could include the innovative deliberative polling approach which worked well in the National Pensions Debate. But the Government also wants to explore how members can influence the board’s operations, as well as being consulted. Options on this could range from advisory bodies to representation on the board, and we would welcome views on the best approach to put members at the heart of personal accounts.

     Conclusion: outcomes and next steps

114. Personal accounts are at the centre of our pension reform package. Combined with the proposed changes to the state pension system, we are in a position to make a lasting, sustainable set of reforms, supported by a strong evidence base and wide consensus across society.
115. Personal accounts will be delivered by a modern type of organisation: managed independently and for its members, though within a framework set by the Government; not delivered by the State, but by the private sector. Our goal is to set the framework for people to take responsibility for themselves: enabling millions of people to save for their retirement; making difficult choices easier and ensuring that there is a range of choice to suit everybody, whatever their level of income or financial understanding.
116. The reform package will lead to a significant shift in the pension savings culture in the UK. Our research indicates that we can expect:

     • potentially between 6 and 10 million members of personal accounts;
     • £8 billion a year in contributions, of which £4–£5 billion will be new saving;
     • a radical reduction in charges faced by pension savers leading to final pension funds that could be 25 per cent larger;
     • improved incentives to save; and
     • an invigorated and expanded pensions market.

117. The Pensions Commission warned that, without action, future generations of pensioners would be poorer than today’s. We are taking that action now by introducing these reforms. Automatic enrolment will help overcome inertia and short-termism. Personal accounts will lower charges and improve portability. Together with the minimum employer contribution, they will transform incentives to save for ordinary working families.
118. The Government has now set out its plans for reform of both private and State Pensions. The State Pension will become fairer and more generous, providing a solid platform on which people can save. Personal accounts will extend the benefits of work-based saving to those who have not so far had that opportunity. Together, these reforms amount to one of the most significant reforms of the welfare state since Beveridge. They are based on the State as an enabler, giving people control over their lives. To work, these reforms need the commitment not just of the Government but of all parts of society. To last, they need to command a consensus both now and during implementation. We will continue to work to deepen that consensus with all those with a stake in a success of these reforms.

44. Hall S, Pettigrew N and Harvey P, 2006, Public attitudes to personal accounts: Report of a qualitative study, DWP Research Report No 370.