The head of the Association of British Insurers (ABI) has questioned Lord Turner's suggestion that a state run pensions scheme could be run at a costings rate of 0.3% of assets, adding that the private sector could offer a viable low cost alternative to the state.
In his pension report delivered at the end of November last year, Lord Turner, chair of the Pensions Commission, suggested that a low cost state pension scheme was needed to entice UK citizens back into saving for retirement. Lord Turner suggested that a government run scheme could hold administration costs down to just 0.3% of assets.
However, ABI head Stephen Haddrill has argued that the Turner figure is unrealistic and that costs could not realistically be any lower than 0.5% at best. Meanwhile, fearing the Turner report proposals could cost the private pensions sector business, Mr Haddrill has boldly pledged that the private sector could offer a competitive cost-effective alternative to a public scheme given the same regulatory conditions.
If we get the same basic framework [as proposed in the report] – automatic enrolment, simple advice – it [a private sector scheme] will be competitive in cost terms with the state solution, Mr Haddrill told Reuters.
Following the publication of the Pensions Commission’s report, the UK government challenged the private sector to devise a viable alternative to a public pension program by February. Mr Haddrill said the industry was confident it could devise a realistic alternative but not at the 0.3% cost level.