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Fundamental flaw in the NPSS

Standard Life believes that half the people earning under 25,000 involved in the proposed National Pension Savings Scheme would be worse off because of the scheme.
Their savings will be means- tested, so saving will have been pointless in the first place, it says.

We can get into all sorts of arguments about the construction of the scheme and sometimes naive arguments from the consumer lobby and consumer journalists about who should run it and what it should cost. Most of these opinions neglect the need for advice while many expect a privately run and administered scheme, at least partly funded by shareholder capital, to be run for next to nothing.

Such people will be the first to criticise the scheme when it flops or fails to deliver anything but a cut-price service.

But most of this comes to naught when one considers a more fundamental mistake. As the research shows, the biggest issue in pension reform for a vast swathe of the population without adequate pension cover is that the tax and benefit system does not reward saving.

It is much more difficult problem to solve than creating a structure like the NPSS. But it should have been solved first. The NPSS is at risk of harming existing savings in company pensions and now it is at risk of leaving many of the less well-off even worse off.

Perhaps it would have been better if it had never been thought of in the first place. It is time for a proper debate about how the Financial Ombudsman Service functions.
One IFA has managed to overturn an ombudsman’s decision in the High Court. The ruling sees a judge questioning the way the ombudsman determines who is and who is not an experienced investor and how compensation is calculated.
Can we suggest that, instead of more advisers taking to the courts, the FOS considers how it operates in certain circumstances. It needs to dispel the suspicion that the benefit of the doubt is always given to the consumer, particularly when assessing just who is an experienced investor and who is not.


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