A National Pension Savings Scheme (NPSS) could do lethal damage to the structure of existing pensions arrangements in the UK, claims Alan Pickering, senior consultant at consulting firm Watson Wyatt.
Ahead of his speech at the National Association of Pension Funds (NAPF) investment conference in Edinburgh, which begins tomorrow, Pickering, who wrote a previous Government report into pensions in 2002, says the Government should avoid soundbite politics in deciding on its approach to a NPSS.
He points out the NPSS was just one recommendation among many from the Pensions Commission report, and should not be “taken forward in isolation or without taking account of collateral damage which its introduction might cause to those parts of the UK pension system which are working well, and that could work even better if only they had a more sensible legislative framework within which to operate.”
Pickering claims diversity is a strength and not a weakness of the UK pension system, suggesting there is a place for the NAPF’s proposals for Super Trusts, and a role for good quality pension products provided by the financial services industry.
He also says traditional single employer-based schemes are “definitely not past their sell-by date either”, and claims although the NPSS is not a “silver bullet”, it could do “lethal damage to the existing fabric of occupational and personal pension arrangements”.
Employers also have a critical role to play in the reform of pensions, claims Pickering, as they can provide work for older people, along with a cost-effective environment to help pension funds build up.
He says employers should not be seen as "a mere conduit of contributions to an NPSS. When it comes to pensions, employers are trusted and they should be encouraged to go the extra mile in helping meet the real pension needs of real people."
Defined benefit (DB) schemes should also not be seen as a legacy, as the concept of employers sharing risk with employees is by no means fundamentally flawed, but Pickering blames the well intentioned, but misguided interference in workplace pension scheme design by successive governments as the single most important cause of employers withdrawing from risk-sharing pensions.
He says: “First we had personal pensions, then we had stakeholder pensions, now we have NPSS pensions. Successive government seek to secure their legacy by launching a soundbite pension product which is seen as a cure-all.”
But Pickering does point out the Government can still leave a pension legacy by weighing the merits of all the recommendations from the Pensions Commission, including labour market modernisation to ensure the talent of older workers is not wasted, and a bigger state pension payable from a later age in order to remove absolute poverty from the elderly.
He continues: “The NPSS is but one recommendation and to me, the most unattractive recommendation. If introduced as proposed, it could do damage to existing provision, fail to play to the UK strength of diversity and lead to planning blight.”
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
Six hours for a client report
700,000 transfers in 12 months
104 delegates attended
'Benefit from healthy cash levels'
Could be two months to complete payment