UK - Pensions Commission chairman Adair Turner has defended his proposal for a single national pension scheme, arguing rival multi-provider models carry significant performance risks.
Alternatives for a multi-provider alternative were suggested by both the Association of British Insurers’ (ABI) and the National Association of Pension Funds (NAPF), on the grounds this would mitigate the government’s operational set up risk.
But Turner told Global Pensions: “The biggest argument against multi-provider is that if you take that model and combine it with Automatic Enrolment and a default fund, which all of the multi-provider models have...we automatically enrol people into a variety of different providers, some of whom will do better than the others.
“The choice in both the ABI and the NAPF scheme is not made by the individual, it’s made by the employer. So 40 years later somebody gets to retire and he’s got 10% less in his account than the man next door who put in the same amount.
“The reason why is that 40 years before his employer nominated him for multi-employer A [as opposed to a different available option]. There is a major risk of people objecting to the variety of performance which then results.”
Turner told Global Pensions the weight of the argument for the rival proposals was a question to government of, “Do you want to be in the same position as the secretary of state for health in 10 years time, with a computer system which isn’t delivering?”
But he maintained that his proposal was the lowest cost option.
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