Sandie Seward
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New Pension Scheme. (Scam?)A proposed new scheme to persuade Britons to save for their pensions must be simple and cheap to run if it is to succeed, a parliamentary panel said on Sunday.
The House of Commons' Treasury Committee's report comes days before the government is due to release eagerly-awaited proposals for reforming Britain's pension system to cope with a looming crisis caused by an ageing population.
The government is expected to draw on the ideas of a panel of experts headed by Adair Turner, who called for higher state spending on pensions coupled with a new National Pensions Savings Scheme (NPSS) that workers would contribute to.
In a report on the proposed NPSS, the Treasury Committee said the scheme's management fees should be as low as possible.
It also called for more study of the market impact of such a scheme and urged the government to look at new ways to make people more aware of the "long-term financial value of occupational pension schemes".
"There is a great and unique opportunity to reverse the decline in private pension provision and restore confidence in long-term savings," the committee said in its report.
To keep costs and regulation low, it was essential for the NPSS to be simple and suitable for nearly everyone, the committee concluded.
Pension plans should be "more ready-to-wear and less made-to-measure," committee Chairman John McFall, a member of parliament for the Labour Party, said in a statement.
"This is a wake-up call to the pensions industry to put its house in order in this regard," he said.
In common with many European countries, Britain faces a pensions timebomb as the population ages.
Employers, facing rising costs, have been closing traditional, generous pension schemes in favour of schemes in which the employee carries more of the investment risk.
PENSION SHORTFALL
If nothing is done to tackle an estimated 57 billion pound pension shortfall, many Britons may be dependent on means-tested state handouts when they retire.
Turner's Pensions Commission has called for the state retirement age to be raised to at least 67 from 65, and recommended that all employees be automatically enrolled into private pension schemes or a new NPSS.
The NPSS would channel workers' and company contributions into a few large pots of money to reduce management fees.
Critics say the NPSS would damage existing plans and reduce the range of pension fund providers.
The Pensions Commission has said the NPSS should aim for an annual management fee of 0.3 percent, although British insurers say that is too low.
The Treasury Committee said it was of "crucial importance" to the success of the NPSS that the annual management charge was "as low as possible and moves in a downward direction."
"An independent board of the NPSS would have every incentive to see charges low and falling...," it added.
McFall said he believed a 0.3 percent management fee would be "highly desirable". "It ties in with our thinking that we want the maximum returns for people for their pensions."
Another condition for the NPSS to succeed was for the reform of private pension saving to take place in tandem with changes to the state pension system, the committee said.
Industry watchers expect this week's government pension proposals to focus on changes to the state pension system.
They expect the government to back the controversial NPSS proposal but say details may take longer to emerge.
The Association of British Insurers, an industry lobby group, disagreed with the Treasury Committee's contention that allowing employees to choose a pension plan provider would probably mean more regulation and push up costs.
"Contrary to the committee's concern, competition and choice favour the consumer and do not require costly regulation," it said in a statement.
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