UK – The National Association of Pension Funds has proposed a collective trust-based DC alternative to the Pension Commission’s National Pension Savings Scheme idea.
“Collective trust-based defined contributions schemes would be a good alternative to the NPSS,” said NAPF chief executive Christine Farnish.
“Such ‘super trusts’ would be large-scale not-for-profit institutions, each with hundreds of employers automatically enrolling workers into them,” Farnish wrote in the Financial Times.
The funds would be run by experts “with a governance structure designed to act in the interests of members, not providers”.
“Having several such institutions would encourage innovation and dynamism. Their performance on cost, investment returns, administration and member service would be transparent and comparable, helping to drive up performance.”
The trusts’ scale would give them power and they could mitigate investment risk by pooling assets and diversify investment.
She was reacting to the NPSS idea put forward by Lord Turner’s Pension Commission, which has been widely criticised.
Farnish said: “It seems the Commission looked at the retail financial services model of personal pensions, decided it was too expensive and concluded the only alternative was for the government to set up a scheme itself.” She had earlier said the idea smacked of ‘big government’ and a ‘Stalinist’ approach.
Aon Consulting today said such a “huge centrally controlled” scheme was most unlikely to give good value over the long term.
Farnish argued the NPSS is little more than an umbrella structure of million of individual DC contracts, leaving consumers to choose funds without advice. She added a standing Pensions Commission would be a “big step forward”.
Meanwhile the NAPF has announced a mediation service with the Centre for Effective Dispute Resolution. The Pensions Mediation Service would try to resolve potential conflicts "between the interests of sponsoring employers and scheme members . . . before the Pension Regulator needs to become becomes involved".
Elsewhere, the Association of Consulting Actuaries said proposed guidance from the Pension Regulator suggesting most companies could pay off deficits within 10 years could increase annual contributions by £15bn-£27bn. This was on top of the £30bn they paid into pension schemes in 2004.