Personal Accounts Delivery Authority — NEST Pension Advice

What is PADA?

One of the keys to a good pension plan is that it is easy for the contributors to understand, but the new NEST pension risks being buried in a sea of government-coined acronyms: PADA is a NDPB responsible for working with The DWP to introduce the NEST! Let’s cut through all this and look at what these pensions mean for the average worker in plain English.

The Personal Accounts Delivery Authority (PADA) is a Non Departmental Public Body (NDPB) which is accountable to Parliament and reports to the Secretary of State for the Department for Work and Pensions (DWP) on its progress in rolling out the National Employment Savings Trust (NEST).

NEST is the new name for what was previously referred to as Personal Accounts – a new pension scheme targeted at low and moderate income workers to be launched in 2011/2012. The impetus for the scheme is that the over 65s will have doubled in number by 2055, and based on current projections around seven million of them aren’t saving enough to have a pension that meets their demands. Following a 2005 report by the Pensions Commission, PADA was established specifically to introduce Personal Accounts. One of their first big announcements was to brand the accounts as NEST pensions, but what else have they been up to?

PADA is a transitory body to take us from a world with no decent trust-based occupational scheme for low income workers, to one where it becomes institutionalized. As well as communicating the nature of the scheme to employees and employers, PADA will supervise the handover to the Trust Corporation that will manage NEST pensions. Once the Trust Corporation is set up, PADA will become redundant.

Personal Accounts Delivery Authority Management Team

Tim Jones

Tim Jones is the Chief Executive Officer of PADA, and is an old hand in the financial services sector. His prior experience includes a position as Chief Executive of Retail Banking at Natwest, and Chief Executive with Mondex, Purseus Ltd and Simpay Limited. He has also held directorships with Investment Technology Group Inc.and Capital One Bank (Europe) PLC.

Pop Star Nick Carter (PADA's Carter Photo Unavailable)

Heading up the in-house legal team is ex- Freshfields man Nick Carter. With Freshfields Bruckhaus Deringer Nick gained experience outside of finance in the areas of intellectual property, IT litigation and transactions. Some of his clients at this time were in the public sector. Nick’s financial services experience includes a position as Chief Legal Counsel, International for Capital One Bank. This role included responsibility for internal audit, bank regulation, corporate affairs, enterprise risk management, and compliance. He also worked for PA Consulting just before joining PADA.

John Crilly

John Crilly is the experienced Financial Director at PADA One of the highlights of his career was joining Argonaut Games Ltd as a start-up and taking this fledgling technology company right through to a listing on the London Stock Exchange. John spent twenty years with Freeman’s PLC and Sears PLC working in Treasury and Corporate Finance.

Helen Dean

Helen Dean is on a secondment to PADA, and is a full-time civil servant with the Department for Work and Pensions. She heads up Policy and Product Development and draws on a strong track record in pensions policy, having previously been responsible for developing the initial policy on Personal Accounts. She also had a role in the introduction of the State Second Pension.

Mark Fawcett

Mark Fawcett has managed money for the last 21 years, thus not surprisingly he is PADA’s Investment Director. He has worked for Gartmore, Thames River Capital LLP, and American Express Asset Management International. He will play a critical role in managing not only the investment side, but also decumulation and volumes modeling.

Sam Hainsworth

Sam Hainsworth has been with PADA since it started up in 2007. As Chief of Staff she draws on experience gained at the Department for Work and Pensions where she she worked as part of the NEST pension policy division.

Simon Richards

The Business Delivery Director is Simon Richards. He has worked for many of the major financial services institutions in his time: Citibank, Price Waterhouse, and Goldman Sachs. He also took a step in an entrepreneurial direction when he founded Alpheus as an IT consultancy. He is a PADA board member.

Graham Vidler

Graham Vidler is the Director of Corporate Services at the Personal Accounts Delivery Authority. This means that he manages all the communications relating to the scheme and works closely with the DWP on stakeholder and media communications strategy. Graham has long been involved in pensions, and as a House of Commons researcher focused on pensions and social exclusion.

PADA’s management team is backed up by a heavyweight board:

Jeannie Drake, Acting Chair
Tim Jones, Chief Executive
Helen Dean, Policy and Product Development
Paul Hewitt, Non-Executive Director
Simon Richards, Business Delivery Director
Chris Willford, Non-Executive Director
Alison Wright, Non-Executive Director

What are NEST pensions?

The National Employment Savings Trust (NEST) is the name of a UK pension scheme that is scheduled to come into effect in October 2016. It was previously known as the Personal Accounts pension scheme, and is aimed at encouraging low to middle income workers to save for their retirement. Its target is to have two million employees making contributions by late 2016, with salaries of the contributors in the range of £15,000 to £30,000.

The UK government set up the Personal Accounts Delivery Authority (PADA) to oversee the introduction the NEST pension. Whilst PADA is responsible for designing and introducing the infrastructure for NEST, the running of the pension will be handed over to and run by a new trustee corporation called NEST Corporation. A board with independent trustees is expected to be set up to oversee NEST Corporation once the pension is introduced. The regulator is likely to be the Pensions Regulator or the Financial Services Authority.

NEST is just one of the schemes employers can use to fulfill new duties under the workplace pension reforms due to come into effect from 2012. One concern people have is that it will become the default choice, and employers will use it as an excuse to end more generous schemes.

The history of these reforms dates back to 2005 when the independent Pensions Commission published “A New Pension Settlement for the Twenty-First Century”, which recommended changes to reform the pension system. Following this a number of changes were made to the UK pension system via the Pensions Act 2007. This related to changes in the state pension system, and then in December 2006 a further paper was published that related to personal pensions. This resulted in the Pensions Act 2008.

The Pensions Act 2008 focused on ways to encourage individuals to save. One of the biggest changes is placing an obligation on employers to enroll their staff in a pension scheme, and make a contribution to it. The Pensions Act 2008 allowed for the creation of a new pension scheme as a suitable workplace scheme for low to middle income earners, and the remit of the Personal Accounts Delivery Authority was broadened under the act to enable it to establish the infrastructure for the scheme. The Personal Accounts Delivery Authority must come up with the most suitable product for moderate income workers and determine the best strategy to communicate with them.

PADA is one of three bodies under the Enabling Retirement Savings Programme that has overall responsibility for delivering the workplace pension reforms in the Pensions Act 2008. The other bodies are the Department for Work and Pensions, and the Pensions Regulator.

A simple summary of NEST is that it is a personal pension administered by employers. It is planned that employees will be automatically enrolled into a NEST, unless they earn less that the primary tax threshold, or they already contribute to a pension that provides equal or superior benefits to NEST. The underlying investments to be offered are yet to be determined, but they likely to be low cost, with the government pushing for 0.3%. The pensions can be transferred when employers are changed, and accessed after the age of 55. At the time the pensions are accessed there will be an option to take a 25% lump sum tax free. The current plan is that employees will pay 4% of earnings, and employers 4% (1% of which will be via basic rate tax relief).

NEST is a much needed scheme in the UK as estimates suggest that over 10 million people either have inadequate or zero pension provision. The first stab at correcting the problem was the introduction of stakeholder pensions in 2001. Whilst these did a good job of lowering pension fund costs they did not manage to encourage most people to make contributions. It is planned that NEST contributions will not be compulsory, but employers will be responsible for encouraging employees to opt-in.

The National Employment Savings Trust can be compared to Australia’s superannuation scheme. In the mid-1980s Award Superannuation was introduced, where a 3% employer superannuation contribution to employees was made in lieu of a 3% wage increase, and then in 1992 the Superannuation Guarantee Charge was introduced which determined that compulsory employer contributions must be made, with voluntary employee contributions. Employers must pay a minimum of 9% percent of employee earnings under the scheme. One interesting point is that 75% of Australians have balanced superannuation funds which give them exposure to international stock markets. There are some differences to consider. One is the pressure on employers to make significant contributions, and the other is the fact that Australia had all this set up in 1992. One imagines that low to moderate income earners in Australia will be better off than their UK counterparts when it comes to retirement. The NEST can’t come soon enough.

What is PADA?

What are NEST pensions?

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