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MPs want the ABI to prove how its alternative scheme would cut costs

The Treasury select committee has challenged the ABI to prove how its version of the NPSS would drive down costs rather than create more red tape.

The committee’s report on NPSS regulation says simplicity and near-universal suitability are the overriding factors in deciding who should run the scheme.

It says the ABI’s introduction of consumer choice means it must provide convincing evidence that it will bring down costs.

MPs warn of the potential for market operators to exert pressure for any charge cap to be increased with an industry alternative model, as happened with stakeholder products, and suggest that an independent board would help maintain low or falling charges.

The report also calls on the Government to set up ano-ther investigation into the market impact of any form of NPSS, responding to industry concerns about levelling down and a potential decline in savings levels.

It suggests compulsory matching employer contributions will be essential for the scheme to work without regulated advice and any pandering to the business lobby could see a repeat of the failure of stakeholder.

The committee also attacks the relationship between the Government and the FSA, suggesting that the Government must establish a long-term, coherent approach to pension policy and continue to provide leadership and support to regulation.

The report says: “The ABI model introduces consumer choice. From the evidence we received, not least from the regulator, it seems likely that such choice will create additional regulatory requirements. This places an additional onus on the ABI to provide convincing evidence that provider competition will serve to drive down costs.”

ABI head of pensions and savings development Helen McCarthy says: “Contrary to the Treasury select committee’s concern, competition and choice favour the consumer and do not require costly regulation.”

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