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Deloitte
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In response to the White Paper on pension reform published today, Deloitte, the business advisory firm, has considered how the new National Pensions Savings Scheme (NPSS) might be run.

John Connolly, Senior Partner and Chief Executive at Deloitte commented: “The huge boost that this initiative could make to develop the savings culture in the UK should be welcomed.  The challenge now is to ensure that this pioneering scheme is implemented effectively.”

A challenging deadline: The implementation risks

Mike Turley, Head of Public Sector at Deloitte, went on to comment on the challenge facing government and the private sector to implement the NPSS: “Setting up NPSS is a significant project entailing many challenges, given the large number of employees and employers potentially involved. Based on our analysis of the timeframes involved to design, build, procure and implement NPSS, there is a pressing need to start moving forward with the new programme.   The Government must make the first move in the process to agree a framework to set up the NPSS soon or it could put at risk the desired implementation date of 2012.”

State vs. Private sector – a cost debate?

Mark FitzPatrick, Head of the Insurance Practice at Deloitte, commented: “There have been numerous debates on what the NPSS might look like, who might run it and at what cost. We are pleased to see two alternative models for the operation of NPSS on the table. The White Paper indicates that the operational model outlined in the Pension Commission report is favoured, on grounds of potentially lower cost and simplicity of choice for consumers. The second operational model, which includes private sector pension administrators, clearly has a long way to go in terms of convincing the Government. We believe further research is needed on the set up and ongoing costs, the implementation risks, the impact on levelling down of existing schemes and the optimum degree of consumer choice.”

The impact on the fund management industry

Stuart McLaren, Investment Management Director at Deloitte, commented on the impact on the fund management industry: “To run the pension funds at low cost implies that the choice of funds available could be limited to index tracker funds and certain forms of balanced funds.  While the industry will not be earning the level of fees achieved in more actively managed funds, the potential £6-8 billion per annum of new assets under management for the industry could mean significant economies of scale.  The scale of money that will be under the control of the NPSS opens up further ethical questions as to the robustness of investment manager selection and monitoring and to the appropriateness of the available investment strategies for employees.”

Levelling down

There are additional concerns as to the impact on employers.  David Robbins, Partner in Consulting at Deloitte, commented:  “It is vital that safeguards are put into place, as part of the introduction of NPSS, to ensure that employers currently running ‘good’ schemes do not level down there schemes to the new rate of 3%.

“Our discussions with employers in recent months suggest many would consider levelling down. However, this risk may be reduced as a result of proposals to phase in compulsory employer contributions.”

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About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.