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Personal Accounts: NAPF calls for tax incentives for employers

The NAPF is urging the Government to give tax incentives to help employers adjust to the additional £2bn a year costs of auto-enrolment.

In its response to the consultation on the second Pensions White Paper, the NAPF has proposed a “good pension fiscal incentive” which would provide employers offering high value contributions a small rebate during the three years transition – 2012-2015 – to encourage the continued provision of good workplace schemes.
It backs the Government’s decision to establish Personal Accounts as a large multi-employer occupational scheme rather than the industry model with competing branded providers.
It also says is supports the Government’s goal of achieving low charges but says this should not compromise the quality of the default investment options., administration and member information.
It says the upper age limit for auto-enrolment should be the state pension age, although further analysis and consultation should be undertaken in the case of those close to retirement at the time the Personal Accounts scheme is introduced.
As such it says the Government should publish the assumptions underlying its estimates for the costs and charges of Personal Accounts to maintain consensus and build support.
The NAPF backs industry criticism of suggestions that Personal Accounts should be subsidised by the State as it agrees this would create unfair competition.
It also joins industry criticism of Government proposals to increase the annual contribution cap from £3,000 to £5,000.. It says if future savings levels are to be at the same level as those currently typical in DC schemes at 9 per cent of gross salary a ceiling of £3,000 per year would mean that anyone earning up to £33,000 per year would be able to do all of their pension saving in the Personal Accounts scheme.
“We believe the risk of levelling down can be avoided if the Government adopts a narrower definition of the target group and aims Personal Accounts only at those people who do not have access to a good pension at work, rather than those who have the opportunity to join a pension scheme but have not yet done so.”

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