UK – The National Association of Pension Funds says the government should encourage small pension funds to join forces and end fragmentation.
NAPF chief executive Christine Farnish told the European Pensions Summit that fragmentation was an issue in the UK pension system but added smaller pension funds could start “federating” to create multi-employers schemes and benefit from the rationalisation.
The government should assume the role of encouraging pension funds federation, she observed.
Farnish conceded that changing the rules could bring up political hazard issues for any party, but added an easy to understand and effective pension system would bring public consensus and trust, easing political risks.
Finding the right balance between pay-as-you-go and private funded pensions is one of the key to properly reform the pension system.
She said the state should be provider of security for workers and PAYG pensions should be enough to provide “a decent if not comfortable life”, but added ampler provisions were “the job of the market”.
The funded sector must not be burdened with over-regulation. Pension schemes, on the other hand, must provide members with “clear and honest information” and in the case of collective and stakeholders schemes work on improving governance.
Workers must be encouraged to save more through effective, simple incentives without involving means-testing. But what Farnish sees as a way to encourage people most of all is creating a sense of security and trust via “coherent regulation”.
Farnish pointed out the multiplicity of agency and authorities regulating the pension system and said a coherent approach was “desperately needed.”
“Problems are severe but not insurmountable,” she commented.