Why provide better more costly arrangements when there is a Government sponsored alternative? Paradoxically the

Why provide better, more costly arrangements when there is a Government sponsored alternative? Paradoxically, the new scheme might in time result in less being saved in aggregate than occurs at the moment.It might also lull employees into a false sense of security about their pensions. By administering the scheme and collecting the payments nationally, say through the existing Pay-As-You-Earn system, Lord Turner also expects to be able to reduce the annual management charge to 0.3 per cent or less, thus countering one of the criticisms of saving for the low paid – that the amounts are so small that they all get gobbled up in fees.Who could quarrel with such an eminently sensible approach? There are two main criticisms.The most obvious is the possibility that the NPSS becomes seen by employers as an inexpensive default option for pension provision. This is the idea of compulsion-lite, where employees are automatically enrolled into a state sponsored savings scheme, with 4 per cent contributions from employees’ post tax pay and 3 per cent from matching compulsory employer contributions – but subject to an opt out.Employees wouldn’t have to participate if they didn’t want to, either because their personal financial situation made it inappropriate or because their employer offered superior, alternative pension arrangements. Hell might freeze over before there’s a resolution to the debate over means tested benefit versus a decent, citizen’s pension.It is in any case the proposed National Pension Savings Scheme (NPSS) which is exercising people in the savings industry most. Reform of the state pension system need not concern us too much here.

There’s little appetite to implement the Turner proposals in their present form, and the chances of anything serious being done about pensions this parliament are virtually zero.Yet this has not been an entirely wasted three years for Lord Turner, for his proposals do at least provide a useful framework for debate and eventual action in some shape or form. Is the Chancellor likely to listen? Don’t hold your breath….and another thing about pension reformMinisterial reaction to the recommendations of Adair Turner’s Pensions Commission has ranged from lukewarm to outright hostile. This would eventually stimulate investment.Mervyn King, Governor of the Bank of England, probably has some sympathy with this view. In so far as central bankers ever criticise their sponsoring governments, Mr King has expressed concern over the growing size of the public sector deficit. Consumers and the public sector are both over-borrowed, so in the absence of a pick up in business investment and exports, which the Government cannot rely on to occur of their own accord, growth is likely to remain subdued for possibly years to come.The solution, he argues, lies in fiscal consolidation. If taxes were raised and spending cut, it would produce an immediate reduction in demand, allowing the Bank of England to cut interest rates without triggering a second leg to the consumer boom. Strip away housing investment – in purchases and improvements – and Britons aren’t saving at all To the contrary, they are still running a deficit.

The same is true in the US, only worse.The time has come, says Christopher Smallwood in Lombard Street Research’s latest Monthly Economic Review, for a new economic policy. It is much harder to see where the counterweight is going to come from for Britain and the US. There’s little sign so far of an uplift in business investment in Britain, while our manufacturing base is now so small that producing decent export growth isn’t going to be easy either. Productively growth meanwhile refuses, stubbornly, to move above trend.More worrying still, the fall off in consumption may yet have further to go. However, to produce the desired outcome of a soft landing for the economy as a whole, the ingredients of growth need to rebalance.It’s all very well removing the boost to consumption delivered by rising house prices, but if the economy is to keep growing, the consumption has to be replaced with something. High government spending helps, but eventually there needs to be an uplift in both exports and business investment to restore economic growth to a reasonably balanced diet.Australia has been lucky in this regard, for it’s got the Asian boom and the related spike in commodity prices to help sustain it. US house price inflation has yet to slow, despite 13 consecutive interest rate hikes, yet presumably much the same effect will eventually kick in.