Select Committee on Treasury Minutes of Evidence


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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