UK – Pension Commission member Professor John Hills has acknowledged there are fears about potential cost escalations with an industry-supplied National Pension Savings Scheme.

He said the NPSS – part of a set or proposals unveiled when the Commission reported in November last year – could face “cost escalation risk” as has happened with a similar system in Australia.

The Commission, headed by Lord Turner, has advocated a state-administered savings scheme with costs of around 0.3% of assets – although some in the industry have questioned if it is feasible.

Speaking at an event organised by the Society of Pension Consultants last night, Hills warned about potential “cream-skimming” by providers – that’s where only higher earners, such as those on salaries above £40,000, are catered for.

He noted that providers of the current stakeholder pension are not interested in those earning under £30,000.

“Maybe nobody will come forward to serve the people we’re interest in,” he said.

Earlier this month the head of the Association of British Insurers queried the idea. "I don't think that 0.3% is achievable," ABI director general Stephen Haddrill was quoted as saying in an interview.

The government has challenged the industry to formulate its own proposals.

In December the Association of Consulting Actuaries said the NPSS, dubbed ‘Britsaver’, represented a dumbing down.