Consumer interest will be at the heart of a trust-based retirement saving scheme for employees, Work and Pensions Secretary John Hutton said.
Mr Hutton announced proposed Personal Accounts would be run by a board of trustees legally obliged to handle the scheme’s assets in the best interests of members.
In addition, a Members’ Panel will be established to ensure the voice of savers is heard and their views taken into account.
Personal Accounts are due to come into force in 2012 as a way of encouraging millions to set aside money for their retirement.
Employees will be auto-enrolled into a scheme in which they will contribute 4 per cent of their earnings, with savings topped up by 3 per cent from employers and 1 per cent in tax relief.
Speaking at the National Association of Pension Funds conference in Manchester, Mr Hutton said: ‘Personal Accounts will be the biggest step forward for workers seeking to build up a pension since National Insurance was introduced in the 1940s.
‘But if we are to make them a success for the millions of people who currently aren’t saving for a pension, we must put in place measures to ensure they have the interests of future members at heart.
‘A board of trustees will take ultimate responsibility for setting the strategic direction for the scheme from the collection of contributions to the investment of assets and payment of benefits.
‘This will include deciding on the choice of funds and the strategy for the investment of the default fund; the appointment and management of external fund managers and ensuring that contributions are invested in the best interest of members.’
Independent of government
Mr Hutton said Personal Accounts would be run independently of the government and the scheme would focus on employees who currently do not have access to good occupational pension schemes.
He added: ‘Our plan is to create a Members’ Panel along similar lines to the Thrift Savings Plan in the USA.
‘The panel could nominate a proportion of the trustees and would be consulted by trustees on key decisions, providing them with access to the views of members and a stronger sense of collective ownership.
‘Given the scale of Personal Accounts, I believe such an approach could be absolutely critical to the success of the scheme and increasing confidence across the whole pensions industry.’
Which? Chief Executive, Peter Vicary-Smith, said: ‘The success of Personal Accounts will depend on the strength of consumer representation. A Board of Trustees will encourage vital consumer trust and deliver the solution to our looming pensions crisis so we welcome the Secretary of State’s continued commitment to place the needs of the consumer at the heart of the Personal Accounts scheme.’