Group personal pensions will be swallowed up by personal accounts because they cannot meet the national pension savings scheme requirement for auto-enrolment, warns Scottish Life head of corporate business Mark Polson.
The Government has stressed the need to protect existing provision but Polson says one of the requirements to qualify for exemption – auto-enrolment – is impossible for GPPs to meet because of the 2004 European distance marketing directive.
This requires the signatory to be in the room when a contract is signed for it to be valid. The only exemption is when the customer has given prior written consent.
The DMD has proved to be a sticking point for auto-enrolment in GPPs but does not affect occupational schemes in the same way.
Polson says: “This will inevitably lead to levelling down. Employers will naturally do what is administratively less cumbersome and this is yet another hoop for them to jump through. It is time the Government thought about the practicalities of personal accounts.”
Scottish Widows head of pensions development Ian Naismith says: “This is one of the biggest obstacles to get around and one that the Government has to crack if it wants good GPPs to continue to run.
“The industry was geared to operate auto-enrolment in GPPs but the DMD scuppered this. I am confident this obstacle will be overcome.”