Naismith adds to fierce industry criticism of the Government’s decision to depart from the £3k cap proposed by the Pensions Commission.
He says raising the cap to £5 k would ensure Personal Accounts targets higher earners rather than focussing on helping low-medium earners that are not saving.
“Personal accounts should be targeted at those currently not saving – or saving very little – for their retirement. Through our pensions research*, we know that affordability is a real concern for many people in this target demographic and the proposed £5000 contribution limit is considerably higher than most would anticipate being able to save per year.”
Naismith argues a contribution level of £5,000 sets the bar too high for most people. He says the cap represents nearly 15 per annual contributions for someone at the very peak of the Personal Accounts Earnings Band , £33,540 for 2006, and well over a quarter of the earnings for those in the middle of the earnings band (roughly £19,000).
“The Government needs to listen to, and ultimately work with, the industry to make sure Personal Accounts are targeted correctly to make the maximum difference to the Nation’s savings habits. By focusing on those who have inadequate or no savings the Government will ensure that personal accounts don’t threaten existing high quality pension provision.
By accepting the Pensions Commission’s original recommendation of £3000 the Government could make a simple target that many could try to achieve.”