Cost appears irrelevant in pension reforms: ABI |
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Published
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Wed, 25 Oct 2006 12:24
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LONDON - A new report by the Association of British Insurers (ABI) claims that allowing industry run pension schemes will not cost any more than a pension scheme run by the government. The planned national pensions savings scheme (NPSS) will only confer limited gains from a centrally run operation, the report said.
The government is planning to institute a pension scheme, which will automatically enroll all employed people, besides forcing employers to contribute 3 percent of their staff salary. The insurance industry is keen to run this system, but the government remains unconvinced about their ability to do so.
The NPSS in its present form will completely bypass the insurance industry, something that has not gone down well with insurance bosses. The scheme was a part of reforms proposals contained in Lord Turner's report released last year.
The ABI says that its model will be simple and thus more effective for consumers rather than the government's model. "This research provides the first thorough economic analysis of the options that are on the table for the Government to consider," said Stephen Haddrill, the ABI's director general. He added that cost alone should not be the deciding factor.
"It is important now to consider the advantages of competition between providers, together with choice for those who want it." Mr Haddrill observed. The research carried out by Oxera on behalf of the ABI also found that economies of scale in the scheme were limited if the number of accounts crossed 500,000.
The NPSS envisages channeling the money collected into investment portfolios in order to plug a massive 57 billion pound pension deficit. However there is disagreement between the ABI and the government on who would run the model.
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Government not to demand repayment of overpaid pension credit 