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A scheme aimed at restoring confidence in workplace pensions and encouraging higher contributions rates has been launched.

The Pension Quality Mark will be awarded to employers meeting a list of criteria, including having a minimum 6% employer contribution rate.

One of the biggest problems with pension funds over the years is that they are frequently under-funded (especially in the early years – where an employee puts in a low monthly amount and the employer may only match this paltry sum) It is hoped initiatives like the Quality Mark will encourage more to be put away in a pension earlier so that on retirement the employee has a decent sized pension pot.

Marks & Spencer and Standard Life are believed to be among the first recipients of the quality mark.

Given that the majority of employers have now closed their final-salary schemes and replaced them with defined contribution pensions, there is a clear need to try and boost contributions. The reason is that with defined contribution schemes the size of the pension on retirement depends on the amount of cash built up through investment. Unlike final salary schemes there is no link to the number of years for which employees have been contributing or their final salary figure at retirement.

With defined contributions the onus is on the individual to ensure they maximise their pension investment in addition to whatever is invested by the employer.

The Pension Quality Mark is designed to create a benchmark for good quality defined-contribution schemes offered by employers. However critics will point to the fact that the award is merely a PR exercise to gloss over the fact that many of the recipients of the award are planning to close final-salary schemes to new and existing members.

However, Martin Bamford, pensions expert at IFA Informed Choice broadly welcomes the initiative arguing it will help distinguish the better defined contribution pension schemes. “Employers do have to compete for the most talented staff on the basis of the quality of the pension scheme on offer. An independent Quality Mark will give all employers a benchmark to aim for. Anything which drags the issue of retirement planning into the limelight is a good thing. Younger employees might have reasons for not joining schemes at an early stage but in many cases they are throwing away valuable employer contributions.”

One obvious question is whether UK workers really in the right frame of mind at the moment post credit crunch to have faith in the stock market and ratchet up contributions?

Bamford is hopeful: “As we exit this recession, this is the perfect time to put pensions and retirement planning back on the national agenda. Hopefully our attitudes towards money and financial planning have changed as a result of recent global events. We all need to be taking greater personal responsibility for our financial security in the future. Whilst we might all have competing financial objectives to manage, growing old with only the minimal financial assistance on offer from the State is the scary prospect for anyone.”