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Last Updated: Thursday, 9 February 2006, 16:25 GMT
Insurers call for pensions role
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Insurers claim a state national savings scheme could be costly
Insurers have urged the government to reject the Pensions Commission's model of a national savings scheme.

The Association of British Insurers (ABI) said that setting up the scheme would be expensive and unnecessary.

Under the Commission's plan, people would be enrolled into the scheme but with the right to opt out.

The ABI said it did not disagree with auto-enrolment, only that the scheme should be administered by insurers rather than by the state.

The ABI told BBC News it could cost in excess of 500m to set up a state body.

"We can run this system better than the state can, we have the expertise in administrating pensions saving funds and investing peoples' money," Jonathan French, ABI spokesman, said.

Speaking at a Confederation of British Industry (CBI) conference on Thursday, Lord Turner, head of the Pensions Commission, denied that the national savings scheme would rely on the state.

"Any argument that the NPSS is a system of nationally directed savings should be dismissed as a misleading contribution to an important debate," Lord Turner said.

Charges

Under the ABI's proposals, employers would choose which insurer should manage the pensions of staff.

Can we really put the financial well-being of future generations in the hands of the people who ran contracting out?
Mick McAteer, Which?

Crucially, though, the employee would be allowed to move their pension pot elsewhere when they left the company.

The ABI said management charges would be kept low because there would be no sales commission for financial advisers.

However, it would be difficult for insurers to match the management charges envisaged under the Pensions Commission proposal.

The Pensions Commission said that management charges should be kept to about 0.5% a year.

Consumer group Which? warned against the national savings scheme becoming the "biggest gravy train in recent history for the insurance industry".

"Can we really put the financial well-being of future generations in the hands of the people who ran contracting out?," Mick McAteer, principal policy officer at Which? said.

"This can't be allowed to happen again. The National Pension Savings Scheme (NPSS) could be what persuades people to save for their retirement and prevent future generations living in poverty," he added.

The ABI is due to make its full response to the Pensions Commission report, which was published in November, in the next few days.




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