View more on these topics

‘Personal accounts a recipe for conflict’

The Association of British Insurers says the Government is failing to live up to its promise that pension personal accounts will not compete with existing provision.

At the Institute of Economic Affairs’ conference in London last week, ABI director general Stephen Haddrill said the Government’s scheme contained several major failings which must be addressed.

He said the industry is increasingly concerned that instead of introducing reforms which will boost private saving, the proposals will “simply rearrange existing saving and create a recipe for conflict and disappointment”.

As an example, he pointed out the controversy over auto-enrolment into all work-based private pensions conflicting with the EU’s distance marketing directive. He said this is a predictable issue but one that the Government has only belatedly started to address although it is working constructively with the ABI over the matter.

Haddrill said if the proposals fall short, unfair discrimination will be created bet-ween different forms of work-based saving.

He said: “Auto-enrolment should not go ahead if it meant the creation of a two-tier workplace pension structure.”

Haddrill said many of the features of personal accounts will bias the system in favour of the scheme and pressure employers to move out of good work-based schemes.

He said the proposal to set the charge cap at £5,000 will pull savings out of the existing market and the increase to the National Insurance upper earnings’ limit could push this up even further.

Haddrill attacked the Government’s suggestion that only £6 in every £10 in per-sonal accounts will be new savings, branding it a “miserable target”.

He called on the Government to do more to ensure that the scheme will not be subsidised by taxpayers.

He said: “The Government must refocus this policy on its target market of low-income and middle-income employees and it must pull back from its plans to expand into existing pension savings and it must retest its proposals against the benchmark of unfair competition.

“If it fails to do either, it will find itself with a compromised system of low-value personal accounts and a full-scale assault on existing good pension provision. It will have wasted the goodwill and support that still exists for the idea of expanding saving and increasing the number of savers.”

Recommended

Dearth by chocolate

Nicolas Sarkozy’s clear win in the French presidential elections should bring many reforms that lead to strong gains for the French equity market.

David Child

Vertex’s managing director of life, pensions and distribution helped foil a multi-million-pound forgery fraud when he worked for the Bank of England but has so far been outfoxed by foxes on his farm. He can console himself in the knowledge that his company leads the way with IFA technology solutions and the next step is expansion beyond the UK. Now his dream product is a commission and statement process. Interview by Sam Shaw.

HSBC says corporate pension schemes are already working

HSBC says it does not see the need for personal accounts because corporate pension schemes are working already.Speaking at the ABI conf-erence, head of pensions and retirement income Ian Martin said the bank writes around 60 corporate sch-emes a week in the small and medium-sized enter-prise market.He said: “This is not the silver bullet to […]

Portman and Nationwide confirmation hearing to take place June 7

The confirmation hearing for the proposed merger of Portman Building Society with Nationwide Building Society will take place on June 7, the FSA says.It will be held at the Norfolk Royale Hotel in Bournemouth on June 7 starting at 11.00 am. The purpose of such hearings is to give interested parties an opportunity to make […]

Artemis Monthly Distribution Fund: positioning and outlook

Managers James Foster and Jacob de Tusch-Lec outline the fund’s investment approach and discuss current investment themes and outlook for the bond and equity markets. As James and Jacob confirm, the Artemis Monthly Distribution Fund’s aim is to generate an income from both equities and bonds. They explain their investment approach in each asset class, the sectors where they are […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment