Joanne Segars, the Chief Executive of the National Association of Pension Funds (NAPF) and one of the keynote speakers at ABN AMRO Mellon’s 2nd Pension Fund Forum, has praised the ‘holistic approach’ adopted by the UK Government’s Pensions White Paper, but warned of “unintended consequences”.
“If the Government holds its nerve, there is a real chance of simplification of pensions, and for real change,” says Segars. “But the devil is in the detail, and there are a lot of details.”
Segars was speaking following a presentation by the Department of Work & Pensions that set out the key elements of the Government’s reform programme – uprating the Basic State Pension (BSP); a gradual raising of the state pension age; and a reduction in means testing. Many of the reforms are currently set to come into force in 2012, and will see automatic enrolment of employees in new Personal Accounts to boost participation levels, along with the introduction of a minimum employer contribution equivalent to 3 percent of an employee’s salary.
Segars said the NAPF welcomed the low-cost, portable Personal Accounts, which form the central plank of the UK Government’s proposals. She said that, with all interested parties subscribing to the key tenets of Personal Accounts and automatic enrolment, there existed a very real potential to establish a lasting consensus regarding pension provision.
Segars warned that once Personal Accounts are introduced, existing schemes may ‘level down’, reducing the benefits they currently offer their members. The NAPF wants to see auto enrolment retained at current contribution rates, with Personal Accounts reserved for those not yet enrolled in schemes. Segars underlined the need for “targeted fiscal incentives” to ensure firms persevere with existing schemes. An annual contribution cap for Personal Accounts – the NAPF advocates 3000 – would serve to ensure the market does not become distorted, she added.