The National Association of Pension Funds finally unveiled its alternative to Lord Turner's proposed National Pensions Savings Scheme yesterday, claiming its system of "Super Trusts" could be run for as little as 0.4 per cent a year - about a third less than the insurance industry's model. In its response to the pensions reform minister Stephen Timms, the NAPF said a network of up to 20 investment trust-style vehicles should be set up to hold the assets of workplace pension schemes, each with their own independent board.
Christine Farnish, the NAPF's chief executive, said the trusts would be large enough to deliver economies of scale, and would ensure costs were kept low due to market competition.
The scheme's annual cost of about 0.4 per cent is one-third less than the estimated 0.6 per cent which the Association of British Insurers' (ABI) "Partnership Pensions" alternative would cost. But both suggestions are higher than the 0.3 per cent target which Lord Turner believes a government-administered and centralised scheme could be run for.
Ms Farnish, who referred to Lord Turner's NPSS plan last week as a "throwback to the Stalinist era", said: "We think this model provides the Government with the best of all worlds. It involves less political risk, minimises cost, enables wider coverage and provides better consumer protection. It's also do-able." But Lord Turner defended his plan, claiming that 0.3 per cent was a realistic target, again pointing to the Swedish NPSS equivalent which is already running at 0.37 per cent and falling. However, he conceded the UK scheme may work out slightly more costly.
The Government consultation closes today. A white paper is due in the spring.