NAPF, Turner renew NPSS debate
UK - Lord Turner, the former chairman of the UK's Pensions Commission, sought to defend his personal accounts idea against renewed criticism from the National Association of Pension Funds at a conference today.
"Private pension provision in the UK is in underlined decline," Turner warned at the Pension Liability Strategies Conference in London.
"In addition especially small and medium sized companies are more and more getting out of pension provision schemes."
To ensure pension provision for these employees he promoted the National Pension Savings Scheme (NPSS) idea, also known as personal accounts, suggested by the Commission.
But NAPF chairman Robin Ellison took issue, saying: "The Turner report is a wonderful report apart from its conclusions."
"Even after the reform the state pension system is not really fit for purpose. It is beyond human comprehension and the Turner solution to that is introducing a fourth national pension."
The tone of the debate was characterised when former NAPF CEO Christine Farnish dubbed the NPSS idea "Stalinist".
Ellison's solution would be to do away completely with the state pension provisions currently in place and instead introduce a system under which everyone living in the UK receives a certain amount when they reach a certain age, subject to tax if they are earning well and exempt from tax if not.
"People would then have a target. At the moment they do not know how much they will get," Ellison told IPE.
In his view this will also help to boost voluntary pension provisions because people can plan properly. He is sure that the political cost of change is much smaller than feared. "The public is much braver than the government thinks. People are not stupid. They will understand that a change in the system is needed as people are living longer."
Meanwhile, John Ashcroft of the Pensions Regulator warned about wrong longevity assumptions.
He said: "There is evidence that some schemes might be behind the trend in their assumptions on longevity in their FRS17 disclosures."
However, that does not necessarily mean that trustees and advisers are using the same assumptions for the scheme as the company uses in its disclosure, he adds. "We are seeing changes in mortality assumptions being made that are increasing liabilities," he told IPE. "They are moving in the right direction. Whether they have gone far enough I don't know."
He cited statistics according to which a one year increase in longevity assumptions can increase liabilities by around 4%.