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Personal accounts will create pensions apartheid, says ACA

The majority of companies of all sizes are worried the Government’s personal accounts plans will damage existing provision and many fear it will create pensions apartheid, according to ACA research.

An Association of Consulting Actuaries survey found sixty eight per cent of employers fear the introduction of personal accounts will lead to a levelling-down in employer pension contributions.

The ACA claims a pension apartheid may develop with close to a third of all employers and 42 per cent of small firms saying they are likely to restrict occupational scheme entry as a result of the proposed reforms.

Seventy-six per cent of employers who responded think the proposed pension reforms will lead to an increase in closures of better workplace schemes.

However, three quarters of companies are against a cap on annual contributions of less than £5,000, which the ACA puts down to a resistance to further prescriptive regulation.

ACA Chairman Ian Farr says all too often over the last 20 years, well-intended legislation has led to damaging consequences for good existing pension provision.

He says: “Whilst the idea behind personal accounts is laudable – extending pension coverage to more employees – it is clear from these findings that many may lose out unless great care is taken.

“Regulatory easements and real positive support for ‘good’ existing and new workplace arrangements is a vital element of reform – this must be effective ahead of 2012 when personal accounts are set to be introduced.”

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