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L&G unveils proposals to protect existing schemes from NPSS

Legal & General is calling for employers opting out of Personal Accounts to be given a choice over auto-enrolment in a bid to prevent levelling down of existing occupational schemes.

In its response to the Government’s White Paper the firm proposes that either employers must introduce automatic enrolment to their scheme, or they must confirm their scheme meets or exceeds the level of membership take-up that personal accounts achieves.
As the Personal Accounts Delivery Authority will only be able to announce take up after the first year of operation, L&G says employers should be given a further year to improve communication with employees and boost take-up levels.
The firm reiterates industry concerns that the long term target to run the scheme on 0.3 per cent AMC is unattainable and means the tax payer will be forced to subsidise the scheme.
It points out that the Government’s own figures real the expected £8bn per year of contributions into Personal Accounts will include £3bn of existing savings. It says this will have been unfair competition if Personal Accounts are benefiting from a state subsidy.
L&G says Personal Accounts are not suitable for everyone, including those with debts and young employees with family responsibilities who may have a more pressing need for life cover and income protection.
It says the Delivery Authority must deliver a clear message on suitability or “loud voices in the media may sway many perfectly suitable people to keep clear of Personal Accounts, to the detriment of their pensions provision.”
The response criticises generic advice as being inadequate to educate people and calls instead for a prolonged and ongoing communication campaign on all available fronts.
L&G wealth policy director Adrian Boulding says: “Failure to accept this responsibility would bequeath a massive liability to the next generation of taxpayers, who would face a clamour for compensation from potentially millions of claimants who would feel that Government had misled them and robbed them of their savings.”

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