UK Deloitte, UK Pension Reform, Ensuring a proper debate around the shape of the NPSS

The White Paper - Security in retirement: towards a new pension system, issued on 25 May 2006, should create the foundations for a positive savings culture. The elimination of means testing over time will remove the disincentives to save for less well off. At the same time, a vehicle to support and encourage saving, is provided by the creation of the National Pensions Scheme (NPSS). We applaud this bold initiative to tackle the retirement savings gap which the UK, along with all developed countries, is facing.

To build upon this strong foundation, we believe attention must be turned immediately to the details of how the NPSS will work. While the NPSS will not be implemented until 2012, the main elements will need to be shaped over the next 12-24 months. The private sector will need to redouble its efforts during this period if it is to play an important role in the NPSS, because the White Paper states a preference for the centralised model recommended by the Pensions Commission.

Previously many of the changes made in the UK pensions affected only certain participants, e.g. changes in tax credits, or involved limited volumes, e.g. stakeholder pensions. The NPSS is distinguished by the large volumes involved and the political objectives that need to be satisfied - providing individual savers choice and transparency at a low cost. To meet these political objectives, a robust and sustainable approach must be built across the NPSS supply chain that provides a commercial return for participants. The supply chain needs to be designed carefully to integrate across the parties involved and to deal with the complexity of the large scale of transactions, individuals and money flows.

As the debate around the NPSS moves into its next phase, we believe the key aspects of the NPSS needing to be addressed will include:

affordability for employers
clarity around the shape of NPSS
overall procurement process and timing
transition timeframe.

For more information, download our full document, Re-igniting the savings culture. (99KB, PDF)