UK - Doubt has been cast over whether a reduction in regulation would have any effect in discouraging employers from "levelling down" contributions under the NPSS.
In a recent speech, work and pensions secretary, John Hutton said reducing regulation would be one way in which the government would support sound, existing pension schemes.
Industry players have previously voiced concern that the introduction of the NPSS (National Pension Savings Scheme) will see employers shut perfectly healthy pension plans to new employees, and contribute only the minimum amount required under the NPSS to their employee's scheme.
These concerns were given weight by a Deloitte study which showed that one in four employers would “level down” their contributions.
“I'm less certain that a reduction in regulation is key in this debate,” commented Alan Reid, head of business development, corporate benefits, at Standard Life.
“The regulation around contract-based employer sponsored schemes, which many sponsors have in place, is minimal. The government said it takes the issue of levelling down very seriously, and will work to minimise the impact on
"One way to encourage employers to keep good schemes open is to offer some sort of financial incentive to offset the extra cost added by the introduction of personal accounts. The ABI has put forward the idea of a pensions contribution tax credit and Standard Life supports this principle."
Reid said it was also important that the conditions surrounding employer opt-out were as a simple as possible.
He commented: "Given that employer schemes are generally based on full earnings rather than mid-band earnings, this extra payment to the employer scheme can reasonably be assumed to negate the disadvantage of higher charges. However, depending on the final charges set within personal accounts, it could well be that many opted-out employer schemes have lower charges anyway."
As yet, although the government has vowed to take the issue of employers cutting back contributions seriously, no concrete plans have been announced.
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