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‘Barren years for pension savings’

Industry opposition is mounting to Adair Turner’s ‘Stalinist’ scheme

Adair Turner’s proposals for a national pension savings scheme are under attack from all fronts for being wrongly costed, badly designed and risking shutting down pension saving in the four-year run-up to its implementation.

With the Government White Paper on pension reform due in the spring, all sections of the industry are responding to the report in light of pensions reform minister Stephen Timms’ challenge to come up with a scheme matching Turner’s 0.3 per cent costing.

But Scottish Equitable pensions development director Stewart Ritchie warns that life offices will have to close to new group pension and stake- holder business from SMEs if the Government gives the green light to Turner’s NPSS.

He says life offices will face at least four “barren” years if the Government gives the go- ahead for implementation in 2010. Insurers will have no choice but to turn away business or face massive losses.

Influential consultant Ned Cazalet doubts that the NPSS can work. It would have a poorer persistency rate than existing pension contracts as it auto-enrols poorly paid employees into a system when they are less likely to keep saving than higher-paid employees.

He says: “We really cannot see what is so mystically special about NPSS such as to cause the long-term discontinuance rate to wither.”

Conservative Shadow minister for work and pensions Nigel Waterson is concerned that the lack of advice and detail on the regulatory framework could leave savers vul- nerable. He says: “Turner said the NPSS is an advice-free model but you cannot get away from the fact that people will always need the right advice.”

This criticism comes as a Swedish parliamentary committee finds that savers in its pension system, which is a model used by Turner for his ideas, need decision-making support and advice to make informed investment choices.

The committee also found that the system costs 0.7 per cent, with 0.3 per cent only a target for the year 2020.

The Association of Consulting Actuaries says it grows “more alarmed” each day, warning that the NPSS will undermine the occupational sector and throw 100 per cent of the investment risk on to employees.

The National Association of Pension Funds has labelled the NPSS “Stalinist” and advocates a system of 10 industrywide super trusts.

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