The Personal Accounts Delivery Authority (PADA) has launched its consultation paper on investment practice for the national pension savings scheme.

It is hoped that Building Personal Accounts: Designing an investment approach will draw upon expertise from across the pension and investment industries on the correct approach for Personal Accounts to take and so work towards the organisation's recommendations regarding the design of the scheme, due for implementation in 2012.

A key issue, PADA says, is cost-effectiveness of the scheme, which will be run by a not-for-profit trustee corporation. The paper covers investment issues such as the investment objective, design of the default fund and the role of responsible investment within the scheme.

"This discussion paper seeks to help PADA design a pension scheme that will provide the best outcomes for future members as well as access to low-cost pension savings," said Tim Jones, chief executive at PADA.

Investment director at PADA, Mark Fawcett, added: "This is a great opportunity to have a debate about how to design the best possible investment approach for the scheme. We are looking to hear both innovative and proven solutions and how these can be delivered at a low charge."

The document will be open to responses for 13 weeks from 7 May 2009. All comments received by PADA will be summarised and published with a response to the paper, which is expected to be published within three months of the deadline.

The consultation has been welcomed by Fidelity International, although the group has warned that PADA must use its imagination and realism.

Julian Webb, head of UK DC at Fidelity International, said: "The consultation gives a useful summary of the issues facing many employers, trustees, pension providers and advisers in designing investment options for defined contribution (DC) plans and demonstrates a degree of imagination around how these might be delivered for what will no doubt become the UK's largest DC scheme.

"Fidelity is particularly encouraged to see that the consultation recognises the value of target-date funds, a popular mechanism used in the US. These funds aim to maximise member returns while young but reducing risk as the member approaches their chosen retirement date."

- Pensions Age May 2009

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