UK - The Personal Accounts Delivery Authority (PADA) has hit back as claims that the new pension regime for personal accounts will not work and research which suggested just two in 100 employers will use the scheme.

Consulting firm Punter Southall has published research alleging just 2% of 300 employers polled - and representing more than one million workers in the UK - will offer employees personal accounts.

In response, PADA noted the scheme launching in 2011 is targeted at companies not currently offering any arrangement, rather than those firms which might already provide pension provision.

"We don't expect huge numbers of companies with existing provision to use us across their workforce - we are designed to complement existing provision," said PADA in a statement.

It pointed out that a "major part of our customer base will come from employers without existing provision", although it added the scheme could also be useful for certain groups of workers such as those on short-term contacts.

"PADA is on track to implement the personal accounts scheme in time for the onset of employer duties in 2012. We envisage the scheme will deliver a good quality pension with a low charge (0.5% AMC or equivalent) and help millions save for retirement," it added.

That said, the second most popular option among employers for implementing the reforms - including mandatory employer contributions and auto-enrolment - was to combine an existing pension plan with a personal account, while a small minority of employers said they were considering levelling down benefits to offset the higher costs.

Other findings from the Punter Southall survey are 80% of those questioned said they intend to adapt their existing schemes to meet the required pension changes in 2012 rather than switch to personal accounts.

However, Punter Southall argued if this 80% becomes a reality, combined with "the inevitable levels of opt-outs", then the eventual membership of personal accounts "will fall a long way short of the desired level" needed to achieve the economies of scale required to deliver a 0.5% annual management charge.

Instead, the firm suggested there is "widespread speculation that this may rise as high as 1%, making personal accounts more expensive than most current DC schemes," and highlighted if there is a 'plan B' to avoid escalating costs if "the necessary scalability isn't achieved from signing up key employers".

Additional findings also revealed 54% of companies expect they will have to undertake a review of their pension arrangements ahead of 2012, however 24% "did not anticipate making any changes".

At least 92% of respondents also agreed employers have a responsibility to regularly review the pension scheme, yet only 48% have done so in the last year while 14% have not reviewed their arrangements in the last five years, if at all.

And just 5% of final salary schemes, among employers questioned, were open to new members, while the option of salary sacrifice has been rejected or not even considered by 57% of companies, and a further 57% of respondents do not re-promote existing schemes to non-joiners.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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