Punter Southall warns of dangers to defined benefit schemes and potential for two-tier provision

30 November 2005, Punter Southall, the national pensions consultancy firm, argues that the recommendations of the Pensions Commission report may not achieve its aim of greater private pension provision.

John Batting, Chief Executive, Punter Southall comments:
“There is a danger that the Pensions Commission’s proposals will make the pensions crisis worse. First, the 3% contribution to the NPSS could become a standard rather than the minimum. Moreover, companies could close their more generous defined benefit schemes and move into the NPSS instead. This would mean that we could save less in pension schemes than now.*

"The recommendations are also likely to change employer behaviour in other ways. The new NPSS system will effectively provide a flat-rate system of tax relief with the same percentage being paid to basic and higher rate taxpayers. As a result employers might provide two types of scheme – an NPSS scheme for basic rate tax payers and a separate pension scheme for higher earners. One of our problems already is the disengagement of senior managers from the main company pension scheme and this proposal could make matters worse.”

“The Pension Commission themselves recognise that their proposals might not actually increase the total amount we are putting into funded pensions*.”

*The long-term macroeconomic impact of the NPSS may therefore be simply to keep funded pension savings as a percentage of GDP, roughly stable at just below 4%. (page 286 of Pensions Commission’s Second Report).

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.