The Investment Management Association has announced its proposals for the National Pensions Saving Scheme. They believe that three factors will be the keystone for the systems success.
The first is an independent board, which would be answerable to Parliament.
The second is that the NPSS should be responsible for setting up the default fund, because they believe that 90% of defined contribution scheme members either picked or fell into the default option.
Finally, the association of the administration of the NPSS should be set up separately to make sure that the system was efficient and simple.
They believe that the scheme itself needs to be simple for employers and employees, while also allowing competition. The association also requested that the scheme was flexible enough to offer choice and minimise political risk.
Our view
Adminstratively this appears to place a huge burden on Government or HM Revenue and Customs or the Department for Work and Pensions. Given the lack of success in administering State Second Pensions, we see this as a huge risk.
In terms of the NPSS estabslishing the default fund, this is dangerous unless the fund carries no risk.
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