View from City Road: Pension sacred cows face challenge

The National Association of Pension Funds can be a hugely complacent body. Just recently there has been a tendency to seize on stories about the mis-selling of personal pensions as further confirmation of the easy superiority of occupational pension schemes.

If only it were so simple. Until a few years ago, employees who left their companies before retirement were routinely ripped off by schemes that froze their pension benefits or offered an inadequate transfer payment. Early leavers still suffer disadvantages.

The amount of abuse in company pension schemes is unknown, but probably much higher than commonly acknowledged.

Questionable investments made by the Coloroll, LEP Group and, of course, the Maxwell pension schemes make the headlines, but similar though smaller abuses go largely unnoticed among many others.

The faults of the personal pensions industry are clear for all to see, thanks to the attentions of the Financial Services Act regulators. Occupational pension schemes escape comparable scrutiny.

Perhaps most importantly, the large final salary pension schemes that make up most of the NAPF look increasingly inappropriate in today's mobile labour market. When even ICI can split itself in two, and when BT and other large employers are shedding tens of thousands of workers, how many employees can be confident that they will be working for the same company in a year's time, let alone 30? It is therefore encouraging that Tom Ross, the NAPF's vice-chairman, seems prepared to challenge some of the industry's sacred cows.

At this week's NAPF conference in Brighton, he suggested the need for industry-wide or regional pension schemes, scrapping the State earnings-related pension scheme and steadily increasing the State pension age up to 75.

Industry-wide or regional pension schemes may seem to offer a sensible evolution for the traditional occupational pension fund.

Some forerunners already exist. However, much as the NAPF may be reluctant to admit it, a simpler and easier solution is the increasing popularity of 'money purchase' schemes, allowing employees to take their own pot of investments from one scheme to another.