Mr Myners told the NAPF Investment Conference in Edinburgh that he expects Personal Accounts to support four to seven million members from around one million employers, initially making a 3 per cent mandatory contribution (augmented by 1 per cent tax relief and 4 per cent employer contribution).
They could be managing as much as £200bn (€262bn) by 2050, so the issue of how those assets will be managed is crucial for the investment management industry.
Pada will issue a consultative paper towards the end of this year and make its own recommendations before eventually ceding authority to the scheme’s trustee. Mr Myners spelled out how he thought Pada’s “commitment to low costs and minimising employer-burden” would translate into investment strategy, particularly for the all-important default option.
“Clearly our desire for low cost will tend towards a passive management style being at the heart of many of our investment offerings, including the default fund,” he said.
“My contention, having worked in the pension fund industry for 25 years, is that the impact of keeping your costs down on the pensions that people receive can be very, very powerful. But if anyone can provide evidence that paying managers more leads to superior pensions, that would be a very interesting contribution to our debate.”
The debate was already up-and-running at the conference, with both David Schofield of Intech and Todd Ruppert, CEO of T Rowe Price, making a strong case for active management over the first two days.
“We would counsel Personal Accounts not to miss out on investment opportunities purely on cost grounds,” added the chairman of the NAPF, Chris Hitchen, in response to Mr Myners.
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