Personal accounts will rip 3.2bn out of existing pension savings, according to the Government’s own estimates.
Despite proposing a raft of measures to protect existing occupational pension provision, the Government estimates in the White Paper that per- sonal accounts will take 8bn in the first year, 60 per cent of which will be new savings.
This means that the new national pension savings scheme is expected to take 3.2bn from existing schemes, as funds in occupational sche- mes are redirected to perso- nal accounts.
This compares with Association of British Insurers’ figures for 2005 showing 12.2bn in new individual single-premium business and 6.5bn in new group business.
The Government proposes an eight-year ban on transfers in and out of personal accounts from 2012 but many employers are expected to close their occupational schemes and auto-enrol employees into personal accounts rather than maintain contributions of at least 3 per cent.
Hargreaves Lansdown head of pensions research Tom McPhail says: “The White Paper is going to be a cause for great concern in the personal finance industry. The Government said it does not want to destabilise existing pension provision but it needs to proceed with extreme caution.”
Scottish Widows head of pensions development Ian Naismith says: “It is particularly important for the pension industry to have the assurance that pension arrangements sold now, for which initial costs will not be fully recovered for several years, will be ring-fenced from early transfer into personal accounts.
“Without this measure, it is likely that few, if any, companies would have been able to participate actively in the company pension market in the run-up to 2012.”