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Saturday 22nd of November 2008
March 16, 2007

NAPF says National Pensions scheme aimed at too many


by Elaine Frei
NAPF says National Pensions scheme aimed at too many

During meetings in Edinburgh, the National Association of Pension Funds (NAPF) warned that government plans to introduce a National Pensions Saving Scheme (NPSS) could be too widely intended and that it could actually cost some individuals pension money. The NPSS scheme is currently scheduled to be activated by 2012 and is aimed to be targeted to around 10 million individuals who do not now have a workplace pension scheme. The NAPF believes that only 7.5 million should be targeted.

While the NAPF is in favor of the NPSS scheme generally, it says that it should only be offered to workers who do not have a pension with employer contribution. Its concern is that too-widely targeted a scheme could mean that many new workers and current workers not yet enrolled in a scheme could be put into the lower-yielding NPSS that don’t cost the employer as much money. The NPSS pensions will require a 4 percent contribution from employees and 3 percent from the employer, with another 1 percent coming in the form of tax relief from the government.

Besides putting new and currently non-covered workers into the new NPSS scheme, some analysts worry that with the NPSS widely available, it would undermine current schemes by encouraging employers to cut contributions into existing schemes. If this were to occur, employees could be left with as much as £3,000 less per year when they retire.

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