View more on these topics

Pension firms to lose £3bn in shift to personal accounts

The pension industry could lose £3bn of contributions annually as individual personal pension customers switch to personal accounts.

Standard Life head of pensions policy John Lawson, along with IBM and representatives from the UK’s other major pension providers that make up the Plan B group, are lobbying poli- ticians, claiming the industry is no longer buying in to the current pension reforms.

Lawson says the group, which Money Marketing first made public in October, is not developing an alternative to personal accounts but wants to raise important concerns before lasting damage is done.

He says: “There is still signi- ficant disquiet about a lot of issues across the board. There are between two and three million people contributing to individual personal pensions and if they all switch to personal accounts that is a hell of a cost to the industry. We cannot afford to lose those contributions. There are potential ways around this but they have not been properly explored.”

Lawson says the group also believes an 8 per cent total contribution is too low and is demanding that basic earnings rather than banded earnings should be used to calculate contributions. He says: “We do not accept that banded earnings is the way ahead. There is no consensus there. It is bad for low-earners and creates huge difficulties for existing pension schemes.

“The big question is whether 8 per cent is enough. It is almost certainly not enough for 95 per cent of the population. It is woefully insufficient. It should be increased incrementally beyond 8 per cent. Why not just continue to increase it in increments up to 9 per cent, then 10 per cent?”

Informed Choice managing director Martin Bamford says: “Additional pressure from a group like this for radical changes could be the thing that pushes personal accounts over the edge and makes the Government realise this is more hassle than it is worth. They need a new solution that actually works.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Interesting prediction, but Personal Accounts won’t happen for at least 5 years so what’s the problem!

  2. This is yet another example of Labour wanting everyone to be leveled down to the lowest common denominator. Part of a trend back to the roots of the current PM.
    Why commentators could not see that Gordon Brown was old style Labour, a died in the wool ‘Tax & Spend’ Chancellor, when he first came to No.11 beats me. Presumably he fooled them with his sticking to the previous Govts. tight spending plans for a couple of years.
    Then he raided the pension funds and was praised for it! No one will notice for the next 10, 20 or 30 years was the general consensus. At one stroke Gordon took UK pension provision from being the envy of Europe to being the poor relation and because of his ‘flawed character’ he cannot admit ANY mistake so has been fiddling around with pensions ever since. He is intelligent enough to know there is a problem but I am afraid that nothing good will come in this area while he is still in government, he just has too much baggage.

  3. Why is anyone bothering with Personal Accounts anymore anyway? Add auto-enrollment to current Stakeholder (or alternative) arrangements and, once RDR has been factored-in, you’re done, aren’t you?
    Time to bin a bad idea and move on unless anyone’s got the political will to go for compulsion…which is what NI was sold as all that time ago, only for previous generations to have spent it and more – something the average Baby-Boomer doesn’t seem to understand…

  4. Yet again this Govt’ss ill-conceived idea will cause grief to the industry…if it gets off the ground…..but then that’s nothing new, with Brown and his cohorts having caused companies and their clients to lose billions already…..pension provision?….only Labour MPs know the meaning of it – a tax-payer funded golden pay-off for years of financial mismanagement!

Leave a comment