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Savings plan could halve GPP business

A National Pension Savings Scheme could kill off more than half the business flows of leading providers, including Scottish Equitable, Friends Provident and Norwich Union.

Experts warn that employers will need to offer a scheme of equivalent value to the proposed NPSS in order to be able to opt out, which could choke group personal pension business because employers will opt for the cheaper central scheme.

The NPSS is to be based on a 7 per cent contribution split between employer and emp-loyee, with a 0.3 per cent ann-ual charge meaning that emp-loyers opting out would need to increase their contribution if they want to levy a higher annual fee. For example, emp-loyers would need to raise stakeholder contributions to around 9 per cent of salary to keep a 1 per cent charge.

Providers are asking whether 0.3 per cent is a realistic charge and whether auto-enrolment and compulsion might be more efficiently applied to their existing stakeholder schemes.

Standard Life head of pensions policy John Lawson says: “This hits different firms to varying degrees. Standard has concentrated on the high-value end of the group market so the imp-act on us should be limited.”

Friends Provident head of pensions marketing Jeremy Ward says: “We think the rep-ort is unlikely to go ahead in its current form, given the Government’s poor record on building computer systems and the fact that we have one of the most cost-effective pension savings schemes in existence in the UK.”

Aegon head of corporate affairs Francis McGee says: “We are still looking at the detail on this but 0.3 per cent is very optimistic looking and the cost differentials may start to disappear once the cost of encouragement, advice and engagement with real people involved is factored in. Auto-enrolment and compulsion could work just as well in existing stakeholder schemes.”

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