Providers could be set for a financial hit as many pension savers are likely to stop contributing to existing private pension contracts when auto-enrolment kicks in during 2012, according to Syndaxi.
Syndaxi Chartered Financial Planners managing director Robert Reid says the problem may be exacerbated for closed-book providers, which will be unable to offset any losses with potentially higher group personal pension sales.
He says: “If the outcome of auto-enrolment is that people cease paying into their pensions, it will have serious repercussions for providers.
“They are going to lose a significant amount of premium income as people are going to stop paying into that and go for the maximum contribution in personal accounts or the workplace pension their employer sets up.”
An Association of British Insurers spokesman says: “We believe, if implemented correctly, auto-enrolment will increase the number of people saving and the total amount saved. But there are certainly risks of levelling down. Personal accounts are meant to be tightly focused on low and moderate earners, not in competition with private pensions.”