Pensions through insurance companies

Wed, 25 Oct 2006

According to a new survey commissioned by the Association of British Insurers (ABI), it could be just as financially shrewd for insurance companies to deliver new accounts for patients than if they were managed by the state.

The ABI commissioned Oxera Consulting to analyse the cost of private or centralised state national pensions savings scheme. Testing possible economies of scale between the two approaches reveals that centralised pension schemes would not provide savings to consumers. Furthermore, they claim, competition between insurance companies could even drive down costs to consumers. Existing life insurance companies were proposed for the task of NPSS by the ABI earlier this year.

The marketing technical manager of Standard Life, Andrew Tully, said: "The Oxera research is helpful as it counters some claims that the industry-led model would cost more. The government should not dismiss this on cost grounds and needs to consider the benefits the industry-led model brings, such as choice and competition."

Another industry expert, the head of corporate affairs at Aegon UK, Francis McGee, reportedly said: "It's good news that the benefits consumers can get from competition have been shown to be valuable by this research. Over time, people will be better off under the multi-provider model. This analysis is a timely intervention and I hope the government will take it into account when balancing the costs and benefits of both models."
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