Examination of Witnesses (Questions 60
to 63)
MR MICK
MCATEER
AND MR
NED CAZALET
25 APRIL 2006
Q60 Jim Cousins: You could do that?
You are a consumer organisation and you could contemplate a situation
in which the Government introduces NPSS but does not introduce
the Turner changes in the basic rate of state pension?
Mr McAteer: Are you asking me
about auto-enrolment and compulsion or are asking me about the
NPSS itself?
Q61 Jim Cousins: Mr McAteer, I am
asking you, as a body that speaks on behalf of consumers, or purports
to speak on behalf of consumers, whether you could visualise a
situation in which the Government cherry-picked Turner so that
NPSS was implemented but the changes in the basic rate of state
pension were not?
Mr McAteer: Yes.
Q62 Jim Cousins: Thank you.
Mr McAteer: What is so funny about
that? NPSS is a product that is meant to be more economic and
efficient.
Jim Cousins: Mr McAteer, there is no
need to get all defensive and try to explain it away. You are
very clear. You have given me the answer I want.
Q63 Chairman: This has been a lively
session from beginning to end. Could I ask you a final question?
Who is winning this argument? Is it a case of, say, the IMA, the
ABI, the NAPF acting here like ferrets in a sack and influencing
the Government? Who is the best ferret? Who is going to influence
the Government?
Mr McAteer: Clearly there is lot
of fear within Government about upsetting the insurance industry.
I have yet to come across anybody who has been able to make an
objective case that actually demonstrates that the retail model
or the ABI model is better than the other proposals.
Mr Cazalet: You may have a Trojan
ferret, I suppose. I am very interested when the ABI makes pronouncements
or talks about the ABI model. Most of the members of the ABI,
in terms of life assurance, are clients of ours and we think we
know what they think. I would suggest that within the life assurance
industry, the legacy players, there is quite a lot of divergence
about what makes sense from a business point of view and what
makes sense from a consumer point of view. I would not take it
that there is an ABI view. We are aware of substantial players.
You say that this model cannot go on, that there is no benefit
for the consumer in the legacy model. I think the range of thought
may be more diverse than you may be thinking. What is quite clear
to us is that the old model of selling pensions and high commissions
and money just going round and round in circles is of no real
economic benefit to anybody, frankly. This is hugely loss-making
and it is unsustainable and will have to come to an end. What
is also clear is that in a low inflation environment, if consumers
are going to have personal pensions (and whether they should do
will depend on means testing and everything else) we need a cost
structure that allows them to be delivered a product that is value
for money. If, at the end of the day, that is a centralised scheme
because that is the only way of reaching those people and that
category of people, well, fair enough, we should get real about
it. For people to pretend that they can, frankly, run the 100
metres in three seconds, as some people seem to be suggesting,
is just a perpetuation of the existing nonsense. The other thing
is that, in terms of all of this, there is another player. You
mentioned the ABI and the NAPF. What does the Treasury think about
this? What is its motivation around tax relief? If we all saved
a lot more and more tax relief was dolled out, what would they
think about that? What is their true view? What is the true view
around means testing? All these things seem to be parked in the
corner as too difficult or for another day. I think we need some
clarity around Government policy and where it is headed in five,
10, 15, 20 years from now. What we do not want is a Pensions Minister
saying, as I think I heard one say, that this pension problem
is not a problem for now; it is a problem for 20 years from now.
No. By then, the thing will have blown up. We need to sort it
out now and get as much clarity of thinking within DWP and Treasury
as we do from the industry, otherwise this is all just people
talking into corners of the room and we will get no sense of it.
Chairman: Thank you very much for your
evidence. It has been a very good start to our inquiry. Believe
it or not, we have in mind to find out almost immediately if there
is an ABI view.
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