Proposals to allow savers to put 10,000 in personal accounts in the first year could be hugely destabilising for the IFA industry, says Hargreaves Lansdown head of pensions research Tom McPhail.
He says this will cause many people who would normally take out a pension with an IFA to save in Isas, for example, until 2012 and then roll 10,000 into personal accounts.
McPhail says: “This could seriously destabilise existing savings and affect IFAs. It will take a lot of people to whom we are selling advice out of the equation.”
As part of a raft of measures to protect existing provision, the White Paper has increased the annual contribution cap to personal accounts after the first year from 3,000 to at least 5,000.
But industry commentators and Opposition parties have raised fears that this could damage existing provision and move the focus of personal accounts away from people with little or no savings.
Shadow work and pensions secretary Philip Hammond urges the Government to reduce the 5,000 cap to refocus on lower earners.
Hammond says: “In turning its back on the 3,000 cap and increasing it to at least 5,000, the Government is hugely expanding the scope of personal accounts when it should be focussed on those most failed by the current system.”