BMS World Mission has become the latest charity to be awarded the Pension Quality Mark. Alexandra Kitching explains how this award is helping to promote excellent quality defined contribution schemes.

Final salary pensions have been in the news a lot recently because of the Government’s intention to reform them in the public sector, which is one of the last bastions of this type of pension.   

However, they have been in decline in the private sector for a number of years. Research last year by the National Association of Pensions Funds (NAPF) highlights that one in five (17 per cent) final salary pension schemes are now closed to both new and existing members.

This was a record jump from 7 per cent in 2009, and just 3 per cent in 2008. In the private sector, only 22 per cent of schemes are still open to new staff, compared with 88 per cent ten years ago.

This trend is also taking place in the charity sector, with organisations like NSPCC and Citizens Advice having closed down final salary pensions in recent years.

Rising longevity and poor stock market returns are making these pensions too expensive to provide. As a result, employers are shutting them down, opting instead for the provision of a less onerous and more predictable kind of pension known as defined contributions (DC) pensions.

There is a common belief that defined benefit (DB) pensions, the majority of which are final salary, equate to good pensions, while DC pensions are bad. But things are never as black and white as they might appear.  While DB pensions are excellent arrangements, there are many outstanding DC pensions offered by employers. 

Independent quality standard

To help recognise them, the National Association of Pension Funds (NAPF) has launched the Pension Quality Mark (PQM). The Mark distinguishes DC pensions with good contribution rates, which are well run by employers and clearly communicated to staff.

For the first time employees have an independent quality standard to help them understand whether the pension scheme offered by their employers is a good one. What’s more, employers will be able to receive independent recognition for their scheme. This will not only help them benchmark themselves against the competitors within their sector, but will also show the employees that the company cares about them and their financial future.

The standard has been very successful. Since its launch in September 2009, it has been awarded to over 110 pension schemes, with around 200,000 employees actively saving in these arrangements.

Global brands like L’Oreal, Vodafone, Kellogg’s and Volkswagen are among the holders of PQM. Several charity employers have also obtained it. These include Sightsavers, the Royal National Lifeboat Institution, the Royal British Legion and the BMS World Mission, which is the latest organisation to have received the recognition.  

BMS World Mission is a Christian mission organisation that works in around 35 countries on four continents. Of the two standards that are available through PQM, it was awarded the superior PQM PLUS.