Insurers want bigger cut to run national pensions saving scheme
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Your support makes all the difference.The UK insurance industry will launch its bid to run a new National Pension Savings Scheme (NPSS) tomorrow, claiming it can administer and manage the project for a cut of about 0.6 per cent a year - double the target set by Lord Turner in his November Pensions Commission report.
In its response to the minister for Pensions Reform, Stephen Timms, the Association of British Insurers (ABI) will claim Lord Turner's target of 0.3 per cent is unrealistic, pointing to its research which concludes 0.45 per cent should be the absolute floor for debate.
The research, conducted for the ABI by Deloitte, says Lord Turner's assumptions in coming to a figure of 0.3 per cent are incorrect. It adds that if the industry is going to provide a good service and good management for its customers, even charges of 0.45 per cent would prove too restrictive.
As a result, it is to propose an indicative range of about 0.6 to 0.7 per cent, calling on the Government to establish an independent body to monitor and control charges for the longer run. It remains keen to avoid the imposition of a charging cap, as exists with stakeholder products.
But in a speech to business leaders in Scotland tonight, Lord Turner will mount a robust defence of his calculations, insisting that several examples from around the world illustrate that a charge of close to 0.3 per cent for administration and management is achievable.
The National Association of Pension Funds is set to come much closer to Lord Turner's target, when it makes its submission tomorrow. The chief executive Christine Farnish is to propose that a handful of independent Super Trusts are set up across the UK. The NAPF will claim its model could be run for less than 0.5 per cent.
Lord Turner's original proposals suggested that the Government create a centralised administrative organisation to run the NPSS. However, it is believed the Treasury and Department for Work and Pensions are keen to see the private sector deviseits own model, so it can avoid the considerable start-up costs of setting up its own body.
However, Mick McAteer, the principal policy adviser for Which?, the consumers association, said yesterday the ABI's model would cost consumers almost £16,000 more in charges over a lifetime, calling on Mr Timms to stick to a government-administered scheme. "We have a unique opportunity to create a consumer-focused pensions system with NPSS and it must not be allowed to become the biggest gravy train in recent history for the insurance industry," he said.
"Industry claims to be able to run a scheme with a charge of 0.7 per cent, but there's no way they can deliver at this level when experience of stakeholder pensions shows us that they couldn't even deliver at 1.5 per cent."
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