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Thinktank says scrap private pensions for &#39people&#39s fund&#39

The financial services industry and stockmarkets are no longer appropriate for pension investments and should be replaced by a “people&#39s pension”, according to thinktank New Economics Foundation.

In its report, People&#39s Pensions: New Thinking for the 21st Century, it proposes scrapping private pensions in favour of a series of people&#39s pension funds which invest in new schools, universities, hospitals and improving public transport, social housing and sustainable energy sources.

The funds could be accessed through a second state pension.

The report says people should be able to transfer into the schemes from occupational or private pensions without penalty and existing pensions should also offer a people&#39s fund option.

The funds would be allowed a return of 4-7 per cent from the projects they assist, which is considerably less than the average of 16.5 per cent paid on the public finance initiatives and public private partnerships that the people&#39s pensions is intended to supplant.

The funds would act in a similar way to building societies, holding the investment project as security until the debt was repaid. The report says pension savers would not only benefit from the stability of their investments but would also directly benefit from investments in public services.

The report was written by Richard Murphy, Colin Hines and Labour MP Alan Simpson.

NEF policy director Andrew Simms says: “It proposes an adaptable model much more insulated from market turbulence than orthodox pension schemes.

“As a result, it will be a model that will be highly attractive for the millions of people seeking financial security in old age. It will be capable of raising large sums of money to invest in the necessary public services.”

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