Commenting on the National Pensions Savings Scheme, Donald Duval, Chief Actuary at Aon Consulting, said the National Pensions Savings Scheme is a bad idea.
“The New Zealanders had to introduce a Government controlled system because they had no private pensions system left. However, even they don’t know whether it will work, because it hasn’t started yet. Buying someone else’s prototype would be a risky business. While people might be unhappy with the way our private pensions have performed, if we let the Government choose the investment managers then they ain’t seen nothing yet,” said Duval in a press release.
“The Governments choice of investment will lose far more than would be saved in charges. If the Government’s good at picking investment managers, why do the civil servants and the politicians have an unfunded pension promise from the Government rather than a pension coming from a Government managed investment fund?
“What would happen in practice is either the Government will try to pick winners, which would be disastrous, or they will go for very safe, and therefore low returns. Low returns would mean low pensions – for someone who saves throughout their working life, three quarters of their pension will come from investment return, and only one quarter from their own contribution.
“If the employer has to contribute then this is compulsion on the employer, at the option of the employee. This will increase labour costs, which will be difficult for many employers who are already struggling to compete with lower labour costs overseas. It is likely to increase the trend for work to be outsourced away from the UK.”
Commenting overall on Adair Turner’s recommendations for Pension reform, Donald Duval, Chief Actuary at Aon Consulting, said: “Whilst a lot of what we have seen in the Turner Report makes sense, without the support of the Treasury, the suggestions will not be worth the paper they are written on. Pension reform will never happen in the UK without the personal backing from Gordon Brown and as we have seen over recent weeks, he just does not seem to want to make the necessary changes to the UK’s wider economic policy that will see a proper reform of our pensions system pushed through.
“History has shown that a pension reform is only possible when the Finance Minister is actively supportive of the proposals put forward and is committed to making the necessary economic changes that will support reform. If we look at Australia or Chile for example, Finance Ministers wanted to make radical reforms and were prepared to push these through despite the short-term political disadvantages.
“Here in the UK, with Brown having little interest in pensions, there has never been any real chance of Turner’s proposals being taken forward under this Government. However, they may influence policy in the longer term.”