View more on these topics

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.”

Recommended

The dark side of Sipps

A-Day There is still much confusion among advisers and investors which needs to be clarified before A-Day, says John Moret

Multi-manager View: David and Goliath

A major factor determining the relative performance of an equity portfolio is the proportion devoted to big and smaller companies. It is not unusual for the leviathans to outpace the minnows (or vice versa) by 10 or 20 per cent in a single year.

Keydata defends strategy as Tenet shuns income bond

Tenet is refusing to sell Keydata’s secure income bond, which invests in US traded life policies, under an agreement reached with its PI insurers. The group, which owns networks Interdependence and M&E with over 1,150 IFAs, claims the product’s links to the US traded life market mean it is based on unproven actuarial assumptions and […]

Equitable battle could see a deal

There was speculation this week that the legal battle between Equitable Life and its former directors and auditors Ernst & Young could reach a settlement.

It’s too soon to write Apple off

By Ali Unwin, Chief Technology Officer & Fund Manager at Neptune Earnings season is noisy in the technology sector and a good quarter does not make a good investment. Numbers that come in marginally ahead or behind ‘market expectations’ are extrapolated to produce narratives showing the rise or fall of companies. Our job as technology […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment