Report slams £3,600 personal account contribution limit
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In a report titled "Pensions for the people: addressing the savings and investment crisis in Britain" the RSA states: "Most pensions experts would consider £3,600 to be very inadequate to meet the retirement income expectations of those with above average incomes, in other words those who are the most profitable to serve.
"The restrictions leave the new system only serving people on lower incomes – people, in other words, that are the least profitable.
"In short, the personal accounts system is barred by its own remit from being the sort of collective investment vehicle that could profitably resolve the issues we need to see addressed.
"By restricting profitability in this way, personal accounts also fail to allow for competition and innovation. We would not support unmanaged competition, but pension providers who can offer the low-cost, responsible features we have laid out should be able to make their services available to those enrolling in the system."
But Association of British Insurers director of life and savings Maggie Craig says the report's central point is flawed.
She says: "Personal accounts were never designed to compete with the rest of the pensions market – the contribution limit of £3,600 was set specifically to ensure that they were focused on their target market of low and moderate earners."
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