View more on these topics

Mass levelling down could lead to £10bn hit to pensions savings

Annual pension contributions could be £10bn lower in 2050 if the majority of employers level down their pension contributions when personal accounts are introduced compared to if there was no reform.

A report from the Pensions Policy Institute into whether personal accounts will increase pension saving has found that the success of the schemes is very dependent upon how employers will act.

In a worst case scenario, the PPI says that if no employer offers more than the minimum contribution level of 3 per cent required under the reforms, the annual total pension contributions could be £10bn lower in 2050 than if personal accounts had not been introduced.

The PPI says that if some employers close their existing schemes or reduce their pension contributions in 2012, the reforms would only increase pension contributions by £2.5bn in 2050, compared to if the reforms had not been introduced.

Standard Life head of pensions policy John Lawson says: “The Government is taking an enormous gamble on how employers will act. There will almost certainly be a lot of employers who will close down their existing schemes or reduce the level of contributions when personal accounts are introduced.

“There will be a minor increase in savings, but these contributions will be spread across a wider group of people so average contributions will go down.”

Recommended

Friends looks at way ahead

Speculation over whether Friends Provident will sell parts of its business or become a takeover target has knocked advisers’ confidence in the insurer.Following its failed merger bid with Resolution and chief executive Philip Moore’s resignation, Friends has hired Goldman Sachs and JP Morgan Cazenove to advise on strategy as it undertakes a review of its […]

Rennison warns provider technology could stall CAR

Product providers may find it difficult to adopt the new technology required for customer-agreed remuneration, warns Thinc Group group corporate strategy director Roderic Rennison.Rennison, who chaired the RDR’s professionalism and reputation working group, told the RDR debate at the Personal Finance Society conference that there are worries around the logistics of CAR that have to […]

Skandia launches client guide to pensions

Skandia has published a guide to pensions for advisers to use with their clients, outlining the key principles they ought to be aware of. The guide, A Fresh Perspective on Pensions, explains why pensions remain one of the most tax-efficient ways of saving for retirement. The guide is jargon-free and explains the principles of pensions […]

Manchester brokers banned for underwriting failures

The FSA has closed down Manchester broker M Young Legal Associates for leaving clients uninsured by selling them insurance without underwriting in place.The regulator has banned managing director Michael Young, also known as Mohammad Younas Yousaf, and financial director Asif Habib Malik for their roles in the affair.The firm advised on and sold after-the-event legal […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment