The IMA has hit out at claims that means-testing will deter people from saving into personal accounts.
In its response to the Pensions White Paper, it says: “Means-testing is no argument against encouraging millions of non-savers to make provision for a decent retirement.”
The IMA says the Government needs to address the risk of small numbers of people losing out from the interaction of means-testing with saving and calls on the Government to undertake further detailed analysis and to “adjust the system as necessary between now and the introduction of personal accounts in 2012”.
The IMA’s stance clashes with the ABI’s White Paper response which says the “cloud of uncertainty” around the future impact of means-testing “seriously undermines the chances of success for per-sonal accounts”.
The IMA also runs contrary to warnings from Scottish Life head of pensions Steve Bee, who says millions of people auto-enrolled in personal accounts will find their savings clawed back by loss of entitlement to means-tested benefits.
The ABI says to protect existing schemes, the Government must ensure that the distance marketing directive does not apply to group personal pensions or group stakehol-der schemes.
This relates to fears that good schemes with employer contributions of at least 3 per cent will be swallowed up by personal accounts because they cannot auto-enrol employees, thereby qualifying for exemption from personal accounts.
The 2004 European distance marketing directive makes it very difficult for employers to auto-enrol employees into GPP as it requires the signatory to be in the room when a contract is signed for it to be valid. The only exemption is when the customer has given prior written consent.
The ABI says: “The Government must live up to its commitment that personal accounts will be genuinely complementary to other private pension provision and ensure that they will not be distortive and anti-competitive.”