Personal accounts could be used as a paradigm for a similar system in the US, but with a more realistic charging structure.
David John, presidential candidate John McCain’s social security adviser, said policymakers on the other side of the Atlantic were closely monitoring the planned UK national savings scheme.
But John, who is also managing director of the Retirement Security Project and a senior fellow of the Heritage Foundation – two significant economic think tanks – said he felt the proposed charging structure of 0.3% was an “impossible dream”.
Despite there currently being a wide divide in American politics, John said there was bipartisan agreement that a universal savings scheme needed to be adopted.
The 0.3% charging structure for personal accounts was influenced by the Thrift Savings Plan, a scheme for ex-members of the US’s uniformed services, but John claimed the UK system would cost more because it would have multiple employers and more complex investment options.
He added: “The 30 basis points (bps) proposal is an impossible dream. The best estimate is probably more in line with 50-60 bps. I’m sure Tim Jones and the Personal Accounts Delivery Authority (PADA) are aware of that too.
“What Jones is attempting to do can be done, but it will be difficult; he faces an incredibly complicated challenge.”
In his first meeting with journalists since taking the role of chief executive of PADA, Jones revealed he personally favoured a 0.5% charge for personal accounts to ensure the start-up costs are met. He said after a while he hoped this would drop to 0.3%.
But he added the decision of the charge would be one in which the government would have the final say.
Jones also announced the results of a poll conducted of 47 major institutional bodies, employers and employee groups, which showed the two most popular charging structures are an annual management charge (AMC) and a combined AMC with a contribution charge.
