The Association of British Insurers (ABI) is "mustering the troops" in an effort to come up with an industry alternative to the National Pensions Savings Scheme (NPSS), and could be up and running by 2007 if approved.
The government threw down a challenge to the industry at the beginning of the month to come up with an industry-led alternative to Lord Turner’s NPSS ready for presentation by early February.
According to John Lawson, head of pensions policy at Standard Life, the industry is in overdrive but working closely with the ABI, who is “mustering the troops”.
“This will see a huge change in the industry. There are estimates that it will cause 50,000 job losses, but even if the industry administers the scheme, it will have to be an electronic offering, with no paper-based interface, with all the data held electronically and the employer doing all the work.”
Lawson says Standard Life had considered such an industry model as that requested by the government, in its first response to the Turner Report, which could be based on its own group scheme which operates at 0.4% without advice.
He suggests it might be possible to create a model wich sees a clearing house distribute funds to the providers so funds chosen by the employee would be able to cope with transfers of funds and re-direction of funds
One concern, however, is this could break the relationship between the employer and provider and move away from group schemes in the future, says Lawson.
He instead argues the financial services industry already operates simpler versions of the NPSS in group schemes, so although the NPSS has been suggested to start in 2010 along with other Turner recommendations, Lawson believes the industry could deliver such a system as early as 2007 if companies were prepared to consider the 'big bang' approach.
Other providers are also supporting the ABI in its efforts to produce an industry alternative.
Rachel Vahey, pension development manager at Scottish Equitable, says: “The deadline is early February and we are very keen to act with the ABI in this and to support them in development and we will give them whatever help we possibly can.”
Alasdair Buchanan, group head of communications at Scottish Life, says they are providing high level feedback on the strategy the ABI should follow and adds they will also be involved when it reaches the practical level.
He continues: “Most of the bigger pension providers are involved as all have a strong interest in getting a sensible outcome. We want to play a very full part in the exercise, and make sure that our experience will be fully utilised.”
Jonathan French, spokesman from the ABI, says they are working very hard to get together the modelling, and are working with member companies, and getting experts from the companies to work together with the ABI’s policy advisers.
He adds: “We have had a tremendous response from our member companies, giving us their resources both in terms of personnel, where applicable, and data. Its very much full steam ahead. Other companies have been doing their own work, and where appropriate will share it with us, and we will build on that to produce an end product which will be a brand new model.”
French continues although the response would be ready by February as part of the joint event between the DWP and the ABI, he would not be willing to put any timeframe to the implementation of an industry model.
“We need to get the details in place first, then if, as we hope, the government accepts our analysis and legislates for an industry model, then we will look at the practicalities. However, having said that, we have got great expertise in the kind of administrative processes needed to run this kind of thing, as we operate microcosms of this kind of system. So it is feasible that we could get a system up and running quite quickly,” continues French.
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