UK - The National Association of Pension Funds (NAPF) has proposed self enrolment into around 20 defined contribution schemes as an alternative to the Pension Commission's National Pensions Saving Scheme (NPSS).
According to NAPF analysis, the “Super Trusts” would be large enough to deliver economies of scale, driving down costs, and would be trust-based, thus ensuring the interests of consumers were put first.
NAPF chief executive Christine Farnish said management charges for such schemes could be kept around 40 basis points, which is significantly lower than envisaged under other proposals.
“We think this model provides government with the best of all worlds,” she said.
It would involve less political risk, minimise cost, enable wider coverage and provide better consumer protection, she added.
“Super Trusts would be not-for-profit, large-scale bodies whose sole job was to get a good deal for consumers. They would run at low cost and manage investments in a collective way, thus reducing the risk for individuals and doing away with the need for people to make complicated investment choices themselves,” said Farnish.
Having a number of Super Trusts would avoid the dangers of having a single, all-powerful institution that was close to government, and the risk of setting up a massive new infrastructure to collect and allocate savings, she added.
“Ordinary people would know their money was being looked after by someone they could trust, with the expertise to manage funds on their behalf. And there would also be someone there to help them plan their retirement and buy an annuity.”
According to the NAPF, Super Trusts’ costs, investment performance and customer service standards would be transparent, helping drive continuous improvement in the marketplace, and would be monitored by the Pensions Regulator.
NAPF made the statements in response to government’s call to devise a practical alternative to the Pensions Commission’s NPSS.
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