The Government is promising to guard against mass levelling down following the introduction of pension personal accounts and says compliance processes will stop employers persuading staff to opt out.
Speaking at an Association of British Insurers’ event at the Labour conference last week, pensions minister Mike O’Brien said personal accounts will complement existing provision and pump £4bn to £5bn of extra saving into the industry.
O’Brien said: “Our target is to ensure we keep, so far as we can, good quality pension plans that already exist and spread wider the numbers of people who are saving. Some of them will go with existing schemes and many of them into personal accounts.”
He said the Department for Work and Pensions has surveyed 2,500 employers and found little appetite for levelling down. He stressed that the Government will strive to make it as easy as possible for employers to self-certify existing schemes as being as good or better than personal accounts.
Responding to concerns that small employers may pressurise employees to opt out of personal accounts to reduce costs, O’Brien said the DWP is in talks about establishing workers’ rights in relation to the scheme.
He said a balance is needed between creating a level of compliance that employer organisations are happy with and ensuring that employees are not forced to opt out by their bosses.
O’Brien said discussions are taking place to decide final responsibility for governance, mentioning HM Revenue & Customs and The Pensions Regulator as possible contenders for the role.
He claimed the Government has always been clear that the 3 per cent employer contribution is “a start” and a decision on whether to increase this amount is “a matter for another debate.”
Responding to controversy over advice issues, he said the simpler the scheme the better but acknowledged that some of the target market will need more detailed advice.
O’Brien said: “We think there can be basic generic advice. Some people will then require more detailed advice and can go to websites. Some people may require more individual advice and have to go elsewhere and pay for it.”
Referring to speculation that the Conservatives may be about to take a tougher line against personal accounts, O’Brien said the industry will have to wait and see whether the “more abrasive” character of new Shadow Work and Pensions Secretary Chris Grayling will make a difference.