View more on these topics

Deal breaker

Tory U-turn threatens a hard-won consensus on personal accounts

John Greenwood

Greenwood’s View

What has changed to prompt the Tories to break the consensus on personal accounts and universal automatic enrolment? This is a question people trying to plan for 2012 are asking and the answer is far from clear.

Conservative pensions shadow Nigel Waterson is understandably upset he was not consulted on the lengthy lead-in time for micro-businesses, given the likelihood of a Tory Government having to take over management of the project in seven months’ time. Employees of large firms will be justifiably disappointed to learn they will only receive a 1 per cent employer contribution in the first three years.

This aside, are the pension reforms any less worthy of support today than before the rollout announcement?
As I see it, the Tories are breaking the consensus on personal accounts and universal enrolment because they do not like the delay caused by extending the rollout period for small businesses to sign up.

The DWP set this timetable after representations from the Personal Accounts Delivery Authority that enrolling more than a million businesses into the scheme in a shorter timescale was not feasible. Waterson himself argued it was important to avoid a Terminal 5 moment when personal accounts are launched. Yet now, the Conservative party is asking for no contracts to be signed by Pada until after the election.

The official period for a downing of tools is, I believe, three months before an election. Labour would effectively be hanging out the white flag were it to comply now.

Putting pension minister Angela Eagle’s announcement on implementation in context, she is effectively saying some people will not receive the full 8 per cent of contributions until 18 months later than had been envisaged. Delaying the whole process for seven months to catch up, tossing aside hard-won consensus across political parties and unions in the process, makes little sense.

A further issue is the range of problems now being raised. Concerns over means-testing have not been deal-breakers in the past, so why now?

Furthermore, the Tories are calling for the immediate introduction of automatic enrolment for existing schemes. This would be welcomed by the industry but does not square with concerns over means-testing. If you automatically enrol someone into a pension today then they will be at as much risk of being missold as they will be in 2012.

Ed Vaizey, Tory culture shadow, has reportedly warned the Government that it faces the greatest misselling scandal of all time if personal accounts go ahead as written. But weren’t all three main parties signed up to this consensus a couple of months ago?

While the Conservatives have remained consistent on saying they will review the way in which personal accounts and automatic enrolment operates as soon as they get into power, the message at the moment seems to be the whole project is in the air, causing planning blight in the industry.

Bringing pre-retirement access to savings into the personal accounts plan may be a good idea but this can be achieved as an add-on without stopping the entire process now.

It has taken years of work to build this consensus and it would be a great shame if the pension reforms were blown out of the water at this stage.

John Greenwood is editor of Corporate Adviser


News and expert analysis straight to your inbox

Sign up


There are 5 comments at the moment, we would love to hear your opinion too.

  1. Your comment makes sense John but there is a deafening silence about another problem that is just as big – public scetor pensions.
    WHY should the rest of us pay punative taxes so that public sector pensions can be insulated from economic circumstances that the rest of us have to face? Public sector pensions bill – £1.2 trillion and counting

  2. Personal Accounts have been a Dog’s breakfast from the word Go.

    Meanstesting is and should be a deal breaker.

    Either exempt proceeds from meanstesting or have the balls to grab the bull by the horns and make it a COMPULSORY scheme. Mis-selling is only an issue if there is choice, take away choice and there can be no bad choice.
    There would however be an accusation that this was just another “Stealth Tax” This should not have bothered Labour who seem happy to introduce three new stealth taxes everyday before breakfast, but one can see why thr Tories would be chary of adopting a new Labour stealth tax.

  3. The problem with personal accounts is that the more we find out, the less of a good idea they seem to be.

    Sadly when it comes to pensions Governments cannot be trusted to get it right. What we need is input from people in industry who really know what they are talking about, not a group of MP’s mates thrown together to make another quango.

    People need to be encouraged to save for retirement. Making the current pensions legislation simpler would be a good start.

  4. The whole concept is a nonsense. simply enforce the requirement to have a stakeholder scheme and autoenrol into exisiting schemes at the agreed levels and abandon plans for a state scheme.
    Why do they have to make something so simple so complicated.

  5. David Trenner - Intelligent Pensions 3rd November 2009 at 3:34 pm

    “Why do they have to make something so simple so complicated?”

    Because that’s what politicians do!!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm