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UK roundup: Barnett Waddingham, PPI, Aegon, Northern Trust

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  • UK roundup: Barnett Waddingham, PPI, Aegon, Northern Trust

UK - The Treasury may be holding up a proposed Green Paper on pension reform, as proposals for a universal state pension are deemed too expensive, Barnett Waddingham has warned.

Speaking about proposals first unveiled last year that would see all pension-related benefit payments consolidated into one universal state pension, Malcolm McLean, a partner at the consultancy, said a number of issues could be delaying the publication of a green paper, including how to tackle accrued rights in the reformed system, as well as the Treasury's concerns.

"It is feared that what seemed an exciting and forward-looking set of ideas may be proving, from the Treasury's point of view, too expensive to implement in the light of the numbers involved, and if the plan is to proceed, some changes or further timetable deferments may have to be made," he said.

He added that the issue of tackling contracted-out payments, as well as how to treat those who may not have paid in sufficiently to warrant the new state pension level of around £140 a week, would need to be examined.

Meanwhile, research by the Pension Policy Institute (PPI) and Aegon reveals that while auto-enrolment will see the number of pension scheme members increase by 8m, it only expects a 12% rise in contributions.

The PPI also estimated Treasury expenditure on state pension payments would rise from 5% of GDP to 7.3% in 2055.

However, it added that a more radical projection would see expenditure increase to as much as 8.5% of GDP.

Under its central scenario, the first mentioned, auto-enrolment would see the number of members in pension schemes rise from 14m to 22m over three years to 2015.

However, despite the steep increase, it only projected a rise in contributions of £10bn to £90bn, as many of the new entrants would be low-income earners.

Additionally, it said the continued decline in defined benefit contributions and the effect of leveling down in the wake of auto-enrolment would have an effect.

Finally, the local government pension scheme for the Royal Borough of Kensington and Chelsea has awarded Northern Trust an £80m transitional mandate.

Paul Kidd, head of financial services at the local government pension scheme, said they recognised the efficiency of rewarding the transition mandate to the same company already acting as scheme custodian.

The £450m mandate was awarded to Northern Trust in 2009.

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