UK - The Investment Management Association has called for a public and private pension partnership which splits responsibility for pension provision between the government and the industry, claiming it could see an extra £10bn a year flow into pensions.
IMA chief executive Richard Saunders (pictured) said the Swedish system, which involves a funded top-up arrangement for the state system based on individual accounts, provides some interesting pointers for the UK.
The Swedish system is run by a government agency, which takes 2.5% on behalf of every employee each year. The system carries more than 600 funds, charging an average of just under 0.75%.
Saunders acknowledged that the system was under review and had suffered from the fall in the markets only two years after its inception, but said its characteristics were worth considering.
“The key pointer is the idea of a public/private partnership,” he said. “On the one hand, within the public sector we have a well functioning payment collection and client tracking system - it is called the Contributions Agency and exists to collect National Insurance contributions,” he said.
“With its unique identifier in the shape of the National Insurance number, it is well placed to take the burden away from the industry of keeping track of individuals. At the other end of the chain, funds provide the perfect investment vehicle.”
Saunders suggested a fund supermarket sit between the two to run the scheme.
“Some of our early estimates suggest that a scheme of this sort could result in new flows for the industry of £10bn a year,” he said. “For the government, the prize would be a lessening over time of the burden which pensions put on taxation.”
While Saunders said the responsibility for distribution of income lay with the government, he said funds would play a “crucial role” in the pension provision of the future.
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