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Advice is ruled out of equation

Advice has been ruled out of the national personal accounts scheme, echoing Lord Adair Turner’s plans.

Work and Pensions Secretary John Hutton’s plan for personal accounts outlined in the White Paper will follow one of two routes which both remove advice to cut costs drastically and allow for a “light-touch, risk-based and proportionate” regulatory regime.

The Government says it will develop a full employer communications and education package to support the introduction of the scheme and help staff make a range of choices without the need for advice.

Depending on how the Government structures the scheme, these choices will include whether to auto-enrol into the scheme in the first place, choice of provider or administrator, basic choice of investment and whether and when to opt out.

Aegon head of corporate affairs Francis McGee says: “The Government still has to tell us how it is going to help people through these important choices. Do they really think that providing information is enough? It appears to be suggesting this new system can do away with advisers but who better to provide a slimmed-down advice service to complement the scheme, albeit using a new model?”

pensions WHITE PAPER proposalsl A scheme of personal accounts will be introduced into which employees will be automatically enrolledl Employees will contribute 4 per cent of a band of earnings of between 5,000 and 33,000 a yearl Employers to make minimum matching contributions of 3 per cent.

l A further 1 per cent will be contributed by the Government in the form of tax reliefl Employer contributions will be phased in over a three-year period at the rate of 1 per cent each yearl Basic state pension will be linked to average earnings by 2012, subject to affordabilityl Gradual raise of the state pension age to 66 from 2024 for both men and women over a two-year period, with further rises to 67 in 2034 and 68 in 2044l The state second pension will become a flat-rate top-up on the basic state pension by around 2030l Abolish contracting-out for defined-contribution schemes.

l State pension provision should increase over time while the extent of means-testing should be limitedl Reduce the number of years of National Insurance contributions into the basic state pension from the current 44 years for men and 39 years for women to a universal 30 yearsl Re-examination of the regulatory landscape

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