The National Association of Pension Funds' (NAPF) Pension Quality Mark (PQM) is calling for industry views on what pensions schemes should consider when setting the investment strategy for their default fund.

PQM is looking to set tough new minimum standards for default investment funds and it wants to add default funds to its list of criteria that applicants and existing badge holders have to meet.

Default investment options are a requirement for all auto-enrolment pension schemes PQM said it is concerned that people may lose out if they save into a weak default fund.

Alex Kitching, PQM manager, said: "PQM is the standard for best practice and it is continually evolving, both to reflect and lead market changes. Millions of workers will be automatically enrolled into pensions in the years ahead, and the overwhelming majority will end up in the default, so it is a fundamental part of the pension.

"It is essential that those who do not want to make investment decisions about their pension do not get left out or short-changed. Pension schemes must look out for their saver's interests.

"Given the growing scale of membership in default funds, trustees, employers and providers need to focus on the better design, communication and governance of default funds."

Currently, PQM standards focus on governance, saver communications and employers contribution levels, but it is now looking to add default funds to its list of criteria.

PQM suggested that some of the options that the governing body in a defined contribution (DC) scheme should consider include:

- the suitability of the default investment option for members, including its risk and return balance, particularly when members are approaching retirement;

- the investment performance of the default fund and charges of fund managers;

- the quality of communications with savers about the default fund and other investment options, and the level of participation in the default option;

- the level of support available to members who are choosing not to invest in the default fund or for whom the default option may not be appropriate.

The deadline for responses is 20 September 2013, and PQM plans to implement the new changes in April 2014.

First published 12.08.2013

monique_simpson@wilmington.co.uk