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Last Updated: Wednesday, 5 April 2006, 10:16 GMT 11:16 UK
Pension scheme compromise mooted
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Insurers claim a state national savings scheme could be costly
The Department for Work and Pensions (DWP) is believed to be looking at a compromise over how a National Pension Saving Scheme (NPSS) may work.

The government's Pensions Commission has said that people should be enrolled into the NPSS but with opt-out rights.

The commission added the NPSS should be government-run, dismaying insurers.

However, the DWP compromise would have the government collect contributions to the NPSS - but with employees choosing where the money would be invested.

The pensions industry has the experience and expertise to get the NPSS off the ground at lower cost than the government
Jonathan French, ABI

The DWP compromise solution, dubbed a hybrid scheme, would marry the commission's proposals for how the NPSS would work with those of the insurance industry.

Under the Association of British Insurers (ABI) partnership pension proposal, employers would choose which insurer should manage the pensions of staff.

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

"The possibility that the DWP is now looking at a hybrid scheme is very promising and shows ours ideas are being taken on board," ABI spokesman Jonathan French told BBC News.

"The pensions industry has the experience and expertise to get the NPSS off the ground at a lower cost than the government."

Wide-ranging support

On Tuesday, the commission published its final report into the UK pensions crisis.

The report outlined what the commission thinks about the public, governmental and financial industry response to its proposals.

Lord Tuner, head of the Pensions Commission, said that there was wide-ranging support for his key proposals to raise the state pension age and introduce the NPSS.

However, there are reported differences between Prime Minister Tony Blair and Chancellor Gordon Brown over the proposal that future increases in the state pension should be linked to earnings rather than inflation.

The chancellor is said to be unhappy with the proposal that current system of means tested Pension Credit would be abandoned in favour of a higher basic state pension.

The government will set out what it plans to do about UK pensions when it publishes its White Paper during the next few months.

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