Effect of NPSS on work pensions
The government should carefully consider the impact that its pension reforms will have on existing workplace pensions, warns the National Association of Pension Funds (NAPF).
NAPF is concerned that elements of the government's proposals will undermine today's workplace pensions leaving many people worse off.
The government plans to introduce a national pension saving scheme (NPSS) into which employees will be automatically enrolled contributing four per cent of salary, employers would add three per cent and the government itself would add one per cent.
But NAPF believes the government needs to give careful thought to the design of the new personal accounts.
"If all employers offering direct contribution pensions cut back their contributions to the minimal levels of the NPSS, people in workplace pensions could lose out on employer contributions worth around £5,000 a year in retirement," explained NAPF chief executive Christine Farnish.
The NPSS will encourage employers to review their pension arrangements, according to NAPF, and as less than a third of its members currently use automatic enrolment the new rules will result in higher pension costs for many employers.
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