The proposals in the Department for Work and Pensions' White Paper are likely to differ very little from the National Pensions Saving Scheme (NPSS) proposed by the Pensions Commission, IFAonline has learnt.
As the National Pensions Debate kicked off this week with the presentation of industry alternatives to the NPSS, sources suggest the DWP has already made the decision to back the vast majority, if not all, of the Pensions Commission’s proposals and is incorporating those proposals into its White Paper already.
Moreover, despite John Hutton, Secretary of State for Work and Pensions, assurances that "industry groups have now put forward their alternatives [to NPSS] and we will now look at the detail before publishing our White Paper in the Spring", the challenge to industry and other stakeholders laid down by Stephen Timms, Minister for Pensions Reform at the end of last year and the National Pensions Day on March 18th, are rumoured to be simply part of a larger PR exercise.
The scheduling of the White Paper - which Association of British Insurers' director general, Stephen Haddrill, earlier this week said had been confirmed as being delivered in May - reflects the need to get the White Paper out early enough to ensure its progress is not delayed by the Summer recess in Parliament, but so soon after 18th March as to show as the electorate do not feel ignored.
With the Prime Minister keen to push through lasting pensions reform through John Hutton, Secretary of State for Work and Pensions - a known ally - and the Treasury - led by Gordon Brown - believed to have concerns about the contents of the DWP's White Paper, the scene appears to be set for a behind the scenes Blair/Brown showdown.
Some have suggested Brown would be keen to delay the introduction of any proposals resembling the NPSS, if not kill them off altogther, because the impact on tax revenue collection will be immense.
And in his presentation to the National Pensions debate on Tuesday, MP Frank Field, head of the Pensions Reform Group who were advocating the introduction of a Universal Protected Pension, said the views of the chancellor could not be ignored.
He said: “If we are to have a reasonable conversation we should take the position of the chancellor, who is already an important figure, but who may become even more important in the future, into account” when looking at any savings model.
The Pensions Reform Group proposes to leave the basic state pension as it is, but to maximise the opportunity the chancellor has of maximising gains from Pensions Credit.
Alasdair Buchanan, group head of communications at Scottish Life, says in the context of a working NPSS, the loss of revenue would amount to a 'double whammy' for the Treasury.
He says: “First of all, there will be the amount of tax relief they’ll need to give which potentially runs to billions of pounds, which to the Treasury is lost revenue, and then there is the change in consumer behaviour. Where money is being taken out of the economy and into long-term savings, and what that will do is effectively suppress the current consumer led economy.“
Buchanan says this could lead to a similar situation to the one facing Japan, which is a savings crisis the flipside of that facing the UK, where people are saving too much and hampering the economic recovery.
He adds it is by no means certain the government in the wider sense will want a successful saving scheme as it will mean people will be saving rather than spending money on the high street as well as taking revenue away from the Exchequer.
Buchanan suggests the Treasury would have concerns with any of the NPSS alternatives because of the drain on the economy, and would actually be much happier with a gradual approach with more emphasis on the voluntary or private sector pension saving.
“The DWP’s responsibility is the benefits side, while the Treasury has a wider picture looking at more cost effective ways which don’t have the significant risk of the NPSS or equivalent,” he adds.
Given the likely level of Treasury opposition to the NPSS, and given it is unlikely any White Paper that would have such a significant impact on the UK economy would get published without the Treasury giving its assent, it is distinctly possible the White Paper, will be a) late and b) watered down so much Turner's proposals are barely recognisable.
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