Implementing the Turner report

Three leading UK pensions organisations gave qualified support to the Turner Commission's proposal for reform of the UK's state pension system, in submissions to Stephen Timms, the pensions minister.

Both the Association of British Insurers (ABI) and the National Association of Pension Funds (NAPF) agreed with Lord Turner's view that auto-enrolment was key to reaching the groups that have traditionally had a low level of pension savings.

The ABI and NAPF, in tandem with the Investment Managers Association (IMA), also conceded Turner's point that the provision of advice as part of the pension scheme was unnecessary and unduly expensive.

"We have taken on Turner's ideas and stripped advice out of our proposal as it is not of fundamental value to the groups that are being targeted by these proposals," said a spokesman for the ABI.

But the consultation process was not all plain sailing for Turner's proposals, with both the NAPF and the ABI expressing serious reservations about how his proposals for the National Pension Savings Scheme (NPSS) should work in practice.

"The NAPF supports both the principles and the idea that there is a need for reform," said a spokesman. "Where we part company with Turner is on how the scheme should be run."

The NAPF has put forward a proposal for a series of Super Trusts, which will be run in a similar way to existing large employer-based pension schemes. This Super Trust would be run on a not-for-profit basis by a board of trustees, who would represent policyholder interests rather than commercial ones.

The NAPF is claiming a groundswell of popular support for its ideas. A Populus poll commissioned by the organisation suggested that 61% of the population supported their proposal, as opposed to 20% for a government-led solution and a mere 17% backed the idea of private sector involvement.

Although the NAPF wants an alternative to the Commission's proposal for a government run investment scheme, its idea still heeded Turner's call to be mindful of costs.

The NAPF suggestion is based on an annual management charge of 0.4% - a figure that is close to the 0.3% that Turner said was necessary to make a scheme of this kind worthwhile for the low-income groups it is targeting.

This is still an area of contention with the ABI, which considers the 0.3% figure as unworkable and based on flawed calculations. A report conducted by Deloitte on behalf of the ABI said that Turner had understated costs by 50%.

Instead of Turner's figures, which were based on the income of a media earner aged 40; the ABI said a whole range of ages and - given the scheme's target groups - income groups needed to be considered when providing average figures, in which case the actual costs increased.

The ABI was also adamant that comparisons with other countries were based on false assumptions and their costs were not comparable to the realities of setting up a pension scheme in the UK.

"We have to get away from this idea that you can simply transplant other countries' costing onto a UK system. There are systemic reasons why the Swedish can run a pensions system at such low cost, chief of which is the high-level social security system which is in effect subsidising its real costs.

The much-vaunted US savings system is for civil servants, and Australian pension provision grew out its union system. The UK does not have these factors, but what we do have is a highly developed private pension industry and we should build on this strength."

The IMA proposal broadly follows the NPSS system outlined by Turner - the organisation's chairman, Richard Saunders, described the proposals as "broadly workable" - with its main concern being to ensure that pension provision was decentralised.

The IMA proposes a refined version of Turner's vision which has an independent board that will represent policyholders' interests and is accountable to Parliament - a move that Saunders said takes, " the outline recommended by the Commission and develops it into what we believe is a fully workable scheme".

All this appears to prove Turner's assertion that "the debate has moved on", (Life & Pensions, January, p 19) but one organisation - the Pension Reform Group (PFG), headed by former pensions minister Frank Field - still has some major objections to his proposals.

The PFG is concerned by Turner's plan to leave the basic state pension funded from tax, and says that workers should not trust taxpayers who have not yet been born to pay pensions out of their salaries, and is instead proposing a Universal Pension of around 25% of average earnings paid out of a mixture of individual's contributions and tax.

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