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Stakeholder 'unviable and expensive', says expert

UK – Public-private partnerships in pensions – namely the recently introduced stakeholder pensions - threaten to become both administratively unviable and expensive, according to professor Noel Whiteside of the University of Warwick.

In a speech in London yesterday (June 19) Whiteside based her arguments on earlier experiments in UK and her own comparative studies with the French social security system.

After the Second World War, Britain was the only European country to scrap its national health insurance system, which ran from 1912 to 1948, mainly on grounds of over-regulation, says Whiteside.
According to the professor, the problems faced by the French social security system are similar to those that closed down the post-war UK attempt: over-regulation and liability questions have been problematic for decades across the channel.
The French system, dubbed as ‘baroque and ungovernable’ by the French, also combines public regulation of private provision.

There are several problems involving public-private partnerships, says Whiteside. It is not clear who covers for losses in private sector investment and how ‘exogenous shocks’ – widespread unemployment for example – will be handled. Stakeholder pensions will not only raise questions about the gap between the rich and the poor, but also between men and women.
Whiteside points out that women have much more irregular working lives, take maternity leave, and live longer.

In her speech, Whiteside also touched on the question of whether stakeholder pensions are actually just a different form of administration without public sector liability.
She comments: “It is the nature of this partnership that it isn’t a partnership, it is another type of administration, and probably by design there is no public accountability.”

After all, Whiteside argues, people pay for compulsory car insurance, but do not complain about it being a form of taxation. On stakeholder pensions, she concludes: “It quacks like a duck, it walks like a duck, it has a bill – it’s a tax.”

The main difference between purely public and public-private partnership initiatives is that the involvement of the commercial sector increases regulation, which is currently evident in France for example. In order to guarantee transparency and liability issues, more regulation has to be introduced over time when work force demographics change, says Whiteside. “Regulation comes from de-nationalisation and privatisation,” she adds.

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