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Turner says he is caught in a compulsion conundrum

Pension Commission chairman Adair Turner used his speech at the Trades Union Conference in Brighton last week to emphasise the arguments against pension compulsion without ruling out the controversial policy.

He told the conference delegates – many of whom advocate compulsion – that the weight of public opinion is firmly against compelling people to save and it is no good resolving the conflict by introducing employer-only compulsion as evidence suggests that this would come at the expense of wages.

Turner also used the example of Australia, the last dev- eloped country to introduce compulsion, saying the policy does not necessarily fix cost-efficiency problems as it still has high annual management charges.

He said he could not give too much detail on the issue because the commission was entering its equivalent of pre-Budget purdah, with a few details still to be ironed out before the November 30 report publication date but did give some indications of its proposals.

Turner said there would either have to be more means’ testing to the state pension system, higher taxes or National Insurance contributions, higher state pension ages or a mixture of the three.

He said the Government must solve the dilemma of making pensions affordable for low-earners while allowing the financial services industry to make a profit.

In an apparent criticism of stakeholder pensions, Turner said the industry is finding it difficult to sell pensions with annual charges high enough to make profit but low enough to represent good value for the customer.

Turner said: “Many say they do not want to be compelled. We know that resolving that conflict by saying, well let’s just compel employers not employees, is not an answer since there is a wealth of economic theory to suggest that in the long-term compulsory employer contributions will be at the expense of wages.”


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