Adair Turner’s pension commission is expected to recommend a 7 per cent compulsory contribution scheme for employers which will cause a massive shake-up for pension providers.
A key feature of the National Pensions Savings Scheme will be that employers need to offer a scheme of equivalent value in order to opt out.
On a 7 per cent contribution, the most pension providers would be able to charge is 0.3 per cent, while employers would need to up equivalent stakeholder contributions to around 9 per cent of salary with a 1 per cent charge to avoid the scheme, which experts believe would put huge downward pressure on prices.
The scheme would be comprised of 4 per cent employee contributions, including 1 per cent tax relief, and 3 per cent employer contributions.
Employees will be able to pay up to 16 per cent of their salaries into the scheme which is modelled on the Swedish scheme and US Thrift model.