Plans will discourage pensions, NAPF says

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The Independent Online
GOVERNMENT proposals for funding new pensions regulations in the wake of the Robert Maxwell scandal will discourage employers from setting up occupational schemes, the National Association of Pension Funds (NAPF) has warned.

The warning is a response to the Department of Social Security's proposals for a new pensions regulator, which would cost pounds 12m a year to run, plus pounds 15m a year for a compensation fund. The DSS has suggested that the industry should pay, whereas the NAPF wants the Government to bear the cost.

This comes as support grows in the City for the creation of a 'superfund' of up to pounds 1bn to compensate people who have bought unsuitable pensions. A proposal for such a fund has already been made informally to the Securities and Investments Board (SIB), the top investment regulator.

The pensions industry is still wrestling with the problems left over from the Maxwell affair, in which the late tycoon looted his employees' pension funds of more than pounds 400m, as well as poor advice that led to hundreds of thousands of people transferring from employers' schemes to private pensions.

A KPMG report said that up to 400,000 people who transferred money out of employers' schemes might have been badly advised.

Ron Amy, chairman of the NAPF, said: 'The majority of occupational pension schemes are well run. They provide the Government's desired objective - to ensure that retired employees have adequate incomes, above the level which attracts mean-tested benefits.

'Occupational pension schemes are extensively used as replacements for Serps, so it is in the national interest for such schemes to be regulated effectively.'

Mr Amy added that the NAPF's members, who run pensions schemes covering some 7 million employees, support the Pensions Law Reform Committee recommendation that the cost of regulation should fall on the state.

'It should not be borne by employers who choose to provide pensions for their employees,' he said.

Meanwhile the idea of the creation of a superfund to spread the cost of compensating people who were wrongly advised to transfer out of employers' schemes into personal pensions is gaining ground. Around 500,000 people opted out of employers' schemes, with a total value of up to pounds 7bn.

The pensions industry reckons compensation could cost anything from pounds 100m to pounds 1bn.

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