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&#39Public will pay massive costs of pension reform&#39

Norwich Union is warning that the costs of implementing the Government&#39s pension reform proposals will outweigh any benefits, with the expense ultimately borne by consumers.

It predicts there will be a huge one-off cost of simplifying the pension system, outlined in the Department for Work and Pensions Green Paper and the Inland Revenue&#39s pension taxation simplification paper.

In its response to the paper, NU executive chairman Philip Scott says life comp-anies&#39 already scarce resources will be stretched fur- ther to pay for new infrastructure, significant changes to computer systems and additional communications to pension clients.

NU also calls for a review of the 1 per cent charging cap.

In the Green Paper, the DWP says transitional costs to life companies will “not be heavy” and predicts savings of £150m to £200m a year for occupational schemes and employers.

But Scott says the costs would be far higher and says the life industry should not be expected to pay the bill when it is being forced to operate within the 1 per cent price cap.

Scott says: “The proposals as they stand lack the benefits needed to justify such significant costs that ultimately have to be borne by the consumer. With other significant regulatory changes under way, it is going to be difficult for companies to find the resources to implement the changes.”

A DWP spokesman says: “We expect the proposals in the Green Paper to bring industrywide savings of between £150m and £200m a year. We will refine this view once we have considered all the Green Paper responses.”

Holden Meehan manager of corporate pensions Simon Bonnett says: “I would not be surprised if Norwich Union were saying this to demonstrate to the Government the difficulty of operating under a 1 per cent cap and I do not blame them.”


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