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Autoenrolment into Personal Accounts has to be in the “general interest”, says pensions minister

Pensions minister James Purnell has conceded that personal accounts will not benefit everyone, arguing that autoenrolment should be in the general interest of UK savers.

During a debate on personal accounts hosted by Scottish Widows, the Pensions Policy Institute reiterated concerns that some people, including women with caring breaks and self employed men, would be at “high risk” of losing out by saving into personal accounts as they would lose entitlement to means tested benefits.
Purnell reacted by arguing that without the NPSS reforms 80 per cent of people would be on means tested benefits by 2050 and most people would be eligible for pensions credits. If the reforms go through he claimed a relatively small minority would be eligible for means tested benefits when personal accounts is implemented in 2012 and, therefore, few will be at risk of losing out by saving into the scheme.
He also rejected the idea of scrapping means tested benefits and relying on a boosted universal basic state pension, arguing that a “safety net” was crucial for savers.
He said the idea that loss of means tested benefits is putting people off saving is undermined by the fact that, while UK saving is in decline, the percentage of people on means tested benefits has dropped from 59 per cent in 1979 to 33 per cent now.
But he admitted that personal accounts would not be the right choice for everybody and that it would be impossible to predict the changes in circumstance of people saving into personal accounts for many years.
He said: “If we go down the road that in hindsight there will be misselling then we will never make autoenrolment work. Autoenrolment has to be in the general interest. If the test is in hindsight every decision (to go into personal accounts) has to be correct then it won’t work. If you are putting money away for 40 years there are always going to be unpredictable factors. We need to balance out the risks.”
Also speaking at the event Scottish Widows market director, personal investments & retirement planning Robert Wylie said personal accounts represents a big opportunity to boost saving levels and said he fully understands the Government’s wish to use a single personal accounts model rather than the industry-sponsored model comprised of competing branded providers. But he said there was a lot of “muddled thinking” about charges and that the charges of personal accounts have to reflect the true costs.
He said: “It must be enshrined in legislation that there can be no Government subsidy of personal accounts. There must be a level playing field.”
He added: “There should also not be a presumption that advice to recommend anything other than personal accounts is flawed. The decision to keep RU64 was, at best, unwise. The Government needs to encourage saving – and this is not helped by artificially constraining the market

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