Aifa is warning that personal accounts may end up as a repeat of stakeholder and advisers could be left in a Catch-22 position where they cannot offer advice about schemes.
Director general Chris Cummings told delegates at an Association of British Insurers event at the Labour conference that employers could see the 3 per cent contribution as damaging their profit margins and find ways of persuading staff to opt out, turning schemes into shells similar to stakeholder.
He said Aifa members advise on over 80 per cent of occupational pension schemes in the market and last year were responsible for 89 per cent of personal pensions sold to employers. He warned there must be a level playing field between any generic advice service and regulated advice across the rest of the pension market. Cummings said: “People on low incomes, people across the spectrum, will undoubtedly seek out our members and ask what should I do? I am worried about a Catch-22 position of not even being able to advise them to opt out but being unable to offer them professional advice.”
Pension commissioner for equality and human rights Jennie Drake said : “There are fundamental differences between stakeholder and personal accounts. The scheme is not meant to be the primary saving mechanism but rather a default architecture for those without good enough employer-sponsored schemes.”