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HSBC in call for enforcer

HSBC is arguing for a system of personal accounts with a contribution cap allowing the accounts to be taken out of the means-testing and pension credit system.

It says this would allow people to save without worry with no advice required. The system would be compulsory or what HSBC calls enforced saving.

The bank argues that the 8 per cent figure proposed of employer plus employee contribution will not be high enough to give a reasonable retirement income so it would like to see the minimum contribution raised over time.

It wants steps taken to ensure employers do not use the 8 per cent as a benchmark to decrease contributions into other arrangements.

The personal accounts should be simple and low cost with limited, mostly passively managed investment choices which should include socially responsible options. It says branded providers should be selected through a tender process, with uniform fund charges and a default provider selected by the employer. It would allow switching.

It says a set-up fee would be desirable but might not be politically possible so it suggests a regular account charge plus a low annual charge to provide funding for the system. Existing bank and life office admin structures should offer the accounts through a “thin automated front office”.

HSBC believes to maximise simplicity, transfers from other pension products should be prevented, as should lump sum payouts, while a maximum annual contribution should be applied, allowing the accounts to be excluded from annual and lifetime limits.

It suggests transfers into other pension arrangements should be allowed if savers want wider investment choice or income drawdown.

Head of pensions and retirement income Ian Martin says: “Our research shows individuals understand the limitations of public and employer finance available and are ready for the Government to help us to help ourselves.”

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