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Cazalet says NPSS would see massive lapse rates

Lord Turner’s proposal for a national pension savings sch-eme will be blocked by the Treasury and the Bank of England and never get off the ground, says independent insurance analyst Ned Cazalet.

In his Scottish Life-sponsored report, called, Polly Put The Kettle On – Pension Profit- ability, Cazalet says if the NPSS does go ahead, insurance firms would be mad to get involved in running the scheme because it would be a massive loss-maker due to poor anticipated persistency rates.

Cazalet says Treasury concerns that auto-enrolment into the NPSS could mean tax relief payments rocketing will result in Chancellor Gordon Brown blocking the proposal.

Brown is likely to be backed by the Bank of England, which Cazalet expects to resist the proposal amid fears that massive increases in pension saving could result in deflation.

Auto-enrolment would drag in many relatively poorly-paid employees who are less likely to keep up savings than hig- her-paid workers, so Cazalet says that persistency rates will be worse than the industry average, which sees less than half of pensions in force after four years.

He says that even with 150 a month contributions at the 0.3 per cent annual management charge, with no discontinuances, it would take pro-viders 18 years to break even. Insurers not involved in the NPSS may also have to cut charges to compete.

Cazalet says: “We think that Turner’s NPSS system would be likely to cause a surge in life company pension plan lapses as consumers move to take advantage of the very low proposed pricing levels. We doubt whether the NPSS could ever work as planned.”


Insight appoints Dellar from DWS as head of product development

Insight Investment has appointed Paul Dellar as head of product development. Dellar had the same role at DWS before the firm was bought out by Aberdeen in 2005. He will report to Insight head of products and marketing Brett Greatrex and manage a team of four product developers covering both institutional and retail channels. Greatrex […]

CML urges Government action over Hips

A report published today by the Council of Mortgage Lenders expresses serious concerns that home information packs may not be implemented on time.It is also concerned that the Government and the public do not understand the impact Hips will have on the mortgage market.CML director general Michael Coogan says: “With only 16 months to go, […]

Phoenixes are still a burning issue

A former IFA who set up a claim management firm says the FSA is failing to spot phoenixing after he received a wave of endowment complaints against phoenix firms last year. DTB Investments managing director Derek Baillie says his firm’s experience suggests that phoenixing is much more widespread than thought. He says 90 per cent […]

Misys could sell GI arm and Sesame

Misys says plans for selling Sesame are on schedule and that it is also considering ditching its general insurance business this year. Sesame will be sold off within six months, says Misys, with serious interest in the business being expressed from several financial firms. Misys says it is also exploring the possibility of selling off […]

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What price (more) freedoms?

George Osborne will make his last Budget speech of the current parliamentary term this week, and the early media briefings suggest that pensions will again feature heavily in that statement. So what are we able to learn from the weekend’s coverage?


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