The Guardian reports that Christine Farnish says the NAPF is preparing to propose instead a system of 10 “supertrusts” licensed by the pensions regulator or the Financial Services Authority. Employees would be able to choose one of the not-for-profit trusts to provide their retirement income. Farnish believes initially employers will direct their employees to a trust they have selected.
Under the NAPF’s proposal the trusts would be run by trust professionals and would publish annual reports outlining their investment strategy, returns, membership, administration costs and details about the quality of their communication with members, according to The Guardian. The regulator would be able to compare and contrast the records of the trusts and employees would be able to refer to a league table of performance.
According to Farnish, “Competitive tensions in the market have to be better than a single NPSS [National Pension Savings Scheme].” The NAPF is working on plans to show that the supertrusts could work within Turner’s suggested limit for an investment management fee of 0.3%, though financial firms hoping to manage the pension money do not share this belief.
The UK Pensions Commission led by Adair Turner, Vice Chairman of Merrill Lynch Holdings Ltd, released its recommendations for improving the UK pension situation on November 30 (See UK Pensions Commission Releases Recommendations ). The bulk of its recommendations revolved around a National Pension Savings Scheme in which workers would be automatically enrolled. The NAPF fears that the national scheme would tempt employers to stop making employer contributions in excess of the 3% required by the scheme, and that the best deals with fund managers will not be made to ensure suitable investment strategies for the fund.
The NAPF plans to deliver its counter-proposals by the end of February.