The bickering began early yesterday with the three organisations with the main alternatives to the National Pension Savings Scheme (NPSS) each jostling for position.
Ahead of their presentations to the Department for Work and Pensions event - “Alternative approaches to the National Pension Savings Scheme” - today the Association of British Insurers (ABI), the National Association of Pension Funds (NAPF) and the Investment Management Association (IMA) spent the last 24 hours busily promoting their alternatives to the NPSS and claiming public support for their proposals - while also picking holes in rival schemes wherever possible.
The NAPF claimed consumer confidence was key to the take-up of any new scheme, with almost two-thirds of consumers saying they would prefer a system run by a not-for-profit organisation, such as itself.
In a recent Populus poll for the NAPF, consumers were asked whether they would prefer a new pension system to be run by the government, insurance companies or not-for-profit organisations.
The NAPF says 55% chose the not-for-profit option, with 23% saying a government-run scheme would be the simplest and most efficient method. Just 19% decided in favour of insurance companies.
When looking at the responses of those in work under retirement age, the number of people choosing not-for profit rises to 61%, while the government option falls to 20% and insurance companies drop to just 17%.
It also claims research findings released last week cast doubt on two key features of the NPSS, as people do not believe a new government computer system would manage their savings efficiently and are not confident about deciding how their pension saving should be invested.
Joanne Segars, director of policy at the NAPF, says the survey shows people prefer the security of an organisation with a legal duty to put savers’ interests first, and Super Trusts would do just that and give millions of working people a simple, fair, low cost pensions deal.
She adds: “Our survey shows people have little confidence in either the government or the insurance industry to manage their pension. Ensuring the new pensions system is run by a trusted organisation will be key to its success.”
The ABI, meanwhile, is focusing on the impact any new scheme, in its case the Partnership Pension proposals, would have on the existing savings market, and it warns a proposal along the lines of the NAPF’s Super Trusts would be most likely to encourage employers to dumb down to the lowest possible contributuion rates.
Research from the organisation suggests nearly half of the working population would join a new pension scheme based on auto-enrolment and guaranteed employer contributions, but only 11% of existing savers say they want to quit their existing scheme in order to join a new one.
To promote protection of existing saving, the ABI says it is planning to present four new proposals to the government at the roundtable meeting.
They include suggestions employers are given clear tax incentives not to level down existing pension provision, particularly by reducing rates of employer contributions, and that the government should sponsor renewed efforts to improve financial capability so employees understand the choices available.
It also wants employees to have guaranteed rights to be consulted and their views taken into account when employers propose to change their pension provision, and that the government should review the regulation of the pensions market to ensure existing provision is not at a disadvantage to any new scheme.
Stepehn Haddrill, director general of the ABI, says the Partnership Pensions scheme will be a vital new rung on the savings ladder, but it won’t help to simply spread existing savings too thinly.
He adds: “Government action to ensure existing saving is maintained must be part of its comprehensive reform plan. We must make sure that we do not just divert existing saving, particularly as a result of employers pulling out of their current schemes.”
Speaking at a briefing ahead of the event, Haddrill has said the ABI won’t claim it can provide the model at a particular figure, because nobody knows what that figure will be. But he adds it will be telling the DWP, the private sector already has the kit in place, and has plans for an economic regulator to give consumers confidence and most importantly it can get it going faster and for less money than the government can.
Meanwhile, of the three options, the IMA’s proposals are closest to Lord Turner’s original model for an NPSS, but with what it says is the key principle of a professionally managed default option without over-burdening employers with administration.
The IMA also claims to have the cheapest costs, and suggests it will promote consumer confidence by governing the model with an independent board accountable to Parliament.
Richard Saunders, chief executive of the IMA, says if properly implemented, with an appropriate governance structure to safeguard the interests of the members, the Pensions Commission’s model fro an NPSS will allow people on low incomes to have professionally managed retirement savings which give excellent value for money.
He adds: “This may well be the most significant financial asset of most people in the NPSS target group and it is right that any policy aims to ensure the highest standards in looking after their savings. Our proposals take the outline recommended by the Commission and develop it into what we believe is a fully workable scheme.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards