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Scottish Widows calls for initial charge on Personal Accounts

Scottish Widows says introducing an initial contribution charge on Personal Accounts could reduce setting up costs by up to 75per cent.

In its response to the Government’s White Paper on pensions reform, the firm says the plans for Personal Accounts are generally coherent but says the proposed 0.3 per cent annual management charge needs to be at least doubled to avoid the danger of future cost increases or ongoing taxpayer subsidies.
Echoing the ABI’s stance, Widows says a single AMC charge cap is inappropriate and will give rise to a projected initial capital requirement of between £1-2bn to establish Personal Accounts for between 6-9m individuals.
It says by including an initial contribution charge of the first month’s premium spread over the first 12 months of a Personal Account’s existence, the capital requirement could be reduced by up to 75 per cent.
Naismith also says there is a real danger savings levels will deteriorate significantly prior to the introduction of Personal Accounts.
He says this could be as a result of consumers misguidedly delaying investing in a pension on the basis that Personal Accounts represent a “better deal”.
He says its is vitally important that Personal Accounts do not undermine existing savings levels and lead to levelling down of existing employer contributions, causing a mass exodus from employer schemes to Personal Accounts.
Widows accepts the Pensions Commission’s proposed £3000 contribution cap and says there will be no facility to transfer existing assets into Personal Accounts.
Widows also argues there should be a significant reduction in future levels of means testing.


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