Lord Turner’s proposed national pensions savings scheme could generate massive losses for any public or private sector body that tried to operate it, Ned Cazalet, the independent life assurance analyst, has warned.
Cazalet said many companies were being too optimistic about the policies and deluding themselves about their profitability.
He also said that many life assurers were eating into their capital by producing a large amount of unprofitable pensions business, according to The Financial Times.
Lord Turner has outlined an auto-enrolled system with annual charges of no more than 0.3% of each employee’s funds under management. An estimated 0.8% would pay the fund manager’s fees, and just 0.22% would be allocated for the construction and operation of the administrative system – a level Cazalet described as unrealistically low.
The Financial Services Authority should be concerned about the industry’s “unrealistic” solvency, Cazalet warned.
He also said many lower paid workers would be more likely to stop saving in the event of a personal financial crisis than those who currently make up the bulk of personal pension holders.