17 March 2006
The Department for Work and Pensions has launched a market research campaign to gauge employers' attitudes towards a National Pension Savings Scheme.
Public Finance has discovered that hundreds of large employers have been approached for their thoughts on Lord Turner's suggested NPSS, with the department paying less attention to the alternative models proposed by the financial services industry.
Work and Pensions Secretary John Hutton this week told a pensions conference that 'Lord Turner's scheme still remains the one to beat,' indicating for the first time that his white paper this spring could strongly favour the NPSS model.
Turner's Pension Commission last year recommended establishing a low-cost national retirement scheme that employees would be automatically enrolled in and employers would be compelled to contribute to (around 3% of staff salaries).
Turner estimated that the cost of administering his scheme could be as low as 0.3% – far lower than alternatives proposed by the likes of the National Association of Pension Funds and Association of British Insurers.
The DWP-commissioned research is being conducted by independent firm BMRB and has focused heavily on employers' willingness to contribute to an NPSS. The study could also reveal the extent to which employers could close generously funded occupational schemes in favour of pushing employees towards the cheaper NPSS model – what Hutton this week referred to negatively as 'levelling down.'
Hutton's speech to the Institute for Public Policy Research conference on March 14 also revealed that the government could reward carers, and women who interrupt work to have children, with additional pension 'credits' to overcome disparities in state pension entitlements between men and women.
Just 30% of women of basic state pension age are entitled to a full pension, which requires 39 years of work (45 for men). On average, they receive just 70% of the full entitlement – pushing many close to poverty thresholds in retirement.
Hutton said: 'We should therefore be looking at how we can develop a new contributory principle that gives women a fairer entitlement to a basic state pension more quickly.'
However, he effectively ruled out one of Turner's potential solutions: a standard 'citizens pension', based on residency and not contributions. Hutton argued that proposal would come too late to help thousands of women already aged over 45.
PFmar2006
