Punter Southall welcomes new “NPSS” accounts as part of a larger solution

30 November 2005, Responding to the Pensions Commission’s report, Punter Southall, the national actuarial consultancy firm, hopes that there will be the political will to take forward the key proposals in the report.

In particular, the firm believes that the proposed National Pensions Savings Scheme (NPSS) accounts are a step in the right direction to addressing the future gap in UK pensions savings.

As part of its solution, the Pensions Commission recommends a NPSS account to which employees will contribute 4% of their income, employers 3% and the state 1%. The level of these contributions has obviously been carefully chosen to provide a significant benefit to many individuals who otherwise might have no pension provision, without the level being so high as to produce unaffordable burdens on individuals or employers.

What this means is that for an individual currently aged 23 earning an average salary and expecting to reach age 68 in 2050, on reasonable assumptions, the total NPSS fund might be expected to be around £145,000 in current day terms, providing a pension of £6,300 per annum in today’s terms.

However, the firm warns that the NPSS will also present substantial costs to the tax-payer. Adam Stanley, a Principal at Punter Southall said, “If the 11.3 million people who are in work and not currently contributing to a private pension were all auto-enrolled in the new schemes and did not opt out, then the 1% state contribution could be expected to add up to £3bn to public spending each year.”

The firm also notes that, whilst the NPSS will provide significant benefits, it cannot be expected to provide the full answer to the UK pensions crisis. Mr Stanley continued, “The Pensions Commission estimates that NPSS will provide 15-18% of average earnings for a median earner. The government must ensure that the other measures recommended in the report – such as the increase in the Basic State Pension and the rise in state pension age – are also put into practice so that the whole savings gap is plugged.”

“Education and advice will be essential in helping individuals to understand exactly what the NPSS will provide so that they do not opt out. Care will also need to be taken to ensure that the accounts act as a springboard for further savings, rather than as a ceiling on the normal levels of contributions paid by members and employers.”

For media information please contact:

Penrose Financial

Roman Townsend, Penrose	020 7786 4875
Julie Allison, Penrose	020 7786 4872

Notes to editors:

Punter Southall:
Founded in 1988, Punter Southall now has over 320 staff including Principals, with offices in Birmingham, Edinburgh, Glasgow, Guildford, London and Wokingham.

Punter Southall & Co is a member of the Sanlam Financial Services (SFS) group of companies.

The firm prides itself on its ability to combine the highest technical expertise with its own unique, consultative, creative and innovative approach.

In conjunction with other SFS Group businesses, Punter Southall & Co can provide the full range of pensions actuarial and investment advice, consultancy and administration services. Its clients, in the UK and overseas, span the full range of pension schemes and related employers, in terms of size, nature, complexity and business sectors.