17 February 2006
Trades Union Congress general secretary Brendan Barber is urging the government to hold its nerve and introduce a state-run national pensions scheme, warning ministers that the financial services industry is trying to 'mislead' them over alternatives.
Barber has written to Work and Pensions Secretary John Hutton outlining his concerns over the finance industry's proposals for a National Pension Savings Scheme, one of the key recommendations to emerge from Lord Turner's review of Britain's pension system last year.
In his letter, seen by Public Finance, Barber backs Turner's suggestion that the NPSS, which would compel employers to make modest contributions (around 3% of salary) towards employees' pensions, should be administered centrally.
When Turner published his report in December, he suggested the NPSS could be operated at a cost of 0.3% of the cash within the scheme. It could 'compel' people to join a pension scheme, by automatically enrolling them, to help Britain raise savings rates. It has been estimated that up to 11 million people are not saving enough for their retirement.
Turner's figures were deemed low and an efficient use of resources, but pensions minister Stephen Timms challenged the financial services industry to propose alternatives by February 9.
Instead, the industry, led by the influential National Association of Pension Funds, focused much of its campaign on questioning Turner's figures, claiming they were unsustainably low.
The NAPF, Investment Management Association and Association of British Insurers have all published alternatives, but Barber describes them as 'deeply unconvincing'.
He writes: 'We are also worried that the powerful supporters of these alternatives will now wage a misleading campaign against the Turner proposals. We believe the government should make it clear that it will use the commission's proposals.'
The TUC recommends that Turner's suggested 0.3% cost 'must be the ceiling, not the opening of negotiations'.
But the NAPF's submission argues against establishing 'an all-powerful institution that is close to government'.
NAPF chief executive Christine Farnish called for a series of s'super trusts', involving the merger of several employers' pension schemes, to be established to manage savings.
The ABI has suggested automatically enrolling people into schemes operated by life insurance companies. However, Barber notes that the financial services industry was unable to cope with the relatively low costs of stakeholder pensions, which were the last attempt to foster a wider savings culture.
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