The 'provisional wing' of pensions

Has the NAPF been sleepy on reform? No longer, says new chief Christine Farnish

Internal links

NAPF boss merger hint

Christine Farnish might appear fragile, with her slender frame and gentle, feminine voice. But when she starts her new job tomorrow, she will have to show nerves of steel and an awful lot of stamina.

As the new chief executive of the National Association of Pension Funds, the 52-year-old former local government officer will be diving in at the deep end. This summer a series of reports will be published, advising on how we can improve our ailing pension system.

Respite will come soon. In four weeks' time she is going on a holiday organised before she took the job. She'll be heading for Italy, although "nowhere near Tony Blair, I fear ... or hope", she chuckles.

The NAPF is at the heart of some of the burning issues in finance. It represents pension funds with around £700bn of assets, which makes it a powerful force both in the City and in the reform of the Government's pension policy. It is also one of the leading forces in "corporate governance", the buzz phrase for avoiding calamities like Enron or WorldCom. Like many observers, she can't rule out the possibility of a similar financial scandal happening on this side of the Atlantic. "Generally, I would say, yes, there will always be cases where things go wrong, either through dishonesty, incompetence or a mistake," she says. "By and large, standards in this country are pretty high and widely regarded to be so."

The NAPF can also strike fear into the heart of a fat cat, as it advises its members on whether to vote to re-elect company directors and often whether to accept their pay packets.

Although corporate governance is a hot topic, Farnish doesn't feel comfortable delving into the details, just yet. She's more confident when she talks about the issues surrounding pension provision.

For the UK population to have a pleasant retirement, it has to put money aside. But it is estimated that the gap between what we save for retirement and what we need is as much as £27bn a year.

The NAPF's part-time chairman, Peter Thompson of actuary Mercer, has criticised the Government for a lack of effort in addressing the issues. Labour is also under pressure because one of its key policies, the introduction of stakeholder pensions, has not attracted the number of savers it had hoped.

Farnish has already been involved in the nation's personal finances, running the consumer division of the Financial Services Authority, the organisation that keeps tabs on the investment community. As a crusader for consumers in her campaigns, to ensure the public was not misled when putting cash into investment trusts, she earned a reputation for toughness in the City. Indeed the FSA was once called the "provisional wing of the Consumers' Association".

Farnish still sees her role as acting for the benefit of the consumer. "I think my experience at the FSA will be very valuable. After all, you wouldn't have pensions unless consumers needed a way of saving for retirement," she says. "Everyone's interests are in having a highly regarded, effective and efficient occupational pension scheme set up in this country, whether it is those who manage the money, scheme members or employers."

She will use her experience when educating the public about pensions. And that's a hard job when there are so many options, from the state pension to Serps to stakeholder plans to company schemes. She says the Government should take action. "Significant progress can only be made with a simpler pensions landscape. "It is very hard to educate people about the different choices, and what the best thing to do is, when life is so complicated. So I'm very much looking forward to the Pickering Report."

This is just one of three imminent, important reports on pensions. In her first four weeks in the job, Farnish will expect the Pickering Report to explain how the Government could simplify the system. Also due is the Sandler Review on long-term savings in general. And the Inland Revenue is investigating how to modify tax rules for long-term savings.

She thinks one of the solutions to the funding gap is a longer and more flexible working life, past the current retirement ages of 60 for a woman or 65 for a man. "It's a no-brainer. There will need to be change to the time when most people expect to retire. What I would like to see is much more phasing and much more of a transition period. We need to rethink the whole work and leisure balance."

Ms Farnish is certainly an inspiration to working mothers, managing to take an eight-year career break to raise four children. Nearly 20 years ago, she went back to work, becoming a research assistant and administrator at Lewisham Council in south London. In just 18 months, she was promoted to run a department. One of the attractions of the job was its favourable treatment of workers with families. "I could take flexi-time, and it had good holidays, not to mention the pensions."

But what future for pensions now that the state is one of the few providers of "final salary" schemes, where workers are guaranteed a certain income in retirement. Many employers have been opting out of these to introduce "defined contribution" schemes, where the pay-outs depend on how well the pension fund performs. The risk – a heightened one in volatile stock markets – is transferred from employer to employee.

Farnish believes compromise is possible. "Final salary schemes are very nice, but they are also very expensive to provide. There has to be a trade-off between affordability and whether or not that scheme suits your particular workforce ... you could have a mix of defined benefit and defined contribution."

It's a tactful answer. But Farnish will need to be more than a diplomat to deal with all the issues on her plate.