The LibDems have attacked the Government’s decision to cut the personal account contribution cap to £3,600 accusing it of “selling out” to the industry.
Despite the general support that has greeted the Government’s change of heart, LibDem Shadow Work and Pensions Secretary David laws says the move risks putting the interests of providers before savers.
Laws says: “The cap on contributions must be set at a level which allows people to save up to two thirds of their income – the level that people say they want.
“The Government should be doing much more to allow people to roll existing small pension pots into their personal accounts, to make saving simpler and more cost effective.
“Instead of selling out to lobbying from producer interests, the Government should boost good quality pensions through better regulation and fairer taxation.”
The industry, and in particular the IMA, had warned that a £5,000 contribution cap risked damaging consumer interests by opening up the potential for individuals to save certain amounts without the benefit of the employer contribution.
IMA chief executive Richard Saunders says: ““The reduction in the cap from the previously proposed £5,000 is a wise decision. It will help to focus the scheme on the target market and protect it against unfounded charges of misselling.
“The statutory minimum employee contributions will benefit from additions by the employer, but top-ups by the individual will not. The bigger the scope for unmatched top-up payments, the harder it becomes to avoid incorporating expensive regulated advice into the system.
”By limiting the cap to £3,600 this decision provides a firm foundation for the further development of the scheme.”