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Government must urgently clarify personal accounts advice costs, say MPs

The Government must urgently clarify the costs of any national system of generic advice that would underpin personal accounts, says the work and pensions committee.
In its report on personal accounts, released today, the committee said the Government had to set out its own estimates for the costs of the service, both in absolute terms and as a percentage of funds held in personal accounts.
It said if either the costs or quality targets cannot be achieved it “will seriously undermine the financial performance of, and public trust in, the personal accounts agenda.”
The report also calls on the Government to clarify whether it is considering some form of statutory waiver from misselling claims for personal accounts and if so how it would operate.
It also highlights the need for any generic information to include details of how to access personalised advice through an IFA.
The MPs expressed concern about a lack of clarity around charges for advice, collection and the third tier in the current proposals and called for the Government to be more open about its modelling and cost estimates.
With regard to the effect of means testing on personal accounts, the committee said it would await the work of the Pensions Policy Institute on the effects of increasing the trivial commutation and pension credit capital limits and calls on the Government to publish a detailed response once the work is finished.
The committee says it accepts the arguments from employers about not giving advice on personal accounts but the employer will have an important roll as the “first port of call” for information.
The report says any contribution cap should retain some flexibility to allow individuals to make extra contributions at certain times and suggests the Government should consider whether a separate cap, set substantially higher than £5,000, should be introduced for firms willing to pay more than the statutory minimum employer contributions.
ABI director general Stephen Haddrill says: “The select committee has rightly highlighted key areas in the Government’s proposals which need to be changed or clarified as soon as possible if our shared objective of more retirement saving is to be achieved”.


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