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Setback for ABI in proposed model

The Association of British Insurers appears to be losing its fight with the Investment Management Association over who should run personal accounts, say industry commentators.

The Department for Work and Pensions’ second Pensions White Paper has rejected the ABI’s proposal for a personal account default fund which would split assets between competing branded providers on a carousel basis.

The DWP has offered a compromise between Lord Turner’s vision of a limited range of non-branded pension funds and the ABI model.

A limited number of branded providers will be allowed to operate in the centrally administered scheme, alongside a default fund, with contracts for fund management tendered out to all interested parties.

Standard Life head of pensions policy John Lawson says there will be few winners in personal accounts as the choice of funds will be limited but he and other commentators say the proposals play into the IMA’s hands.

The IMA wants an independent board, much like the White Paper’s Delivery Authority, to select fund managers to control the assets in a fully diversified default fund.

But Scottish Widows head of pensions market development Ian Naismith says the White Paper meets the key objectives for the industry by protecting existing pension provision. He admits it will be a challenge for insurers to prove they can manage money more effectively than specialist fund managers but says fund managers may struggle to meet the low charge parameters set out by the White Paper.

IMA chief executive Richard Saunders says: “The IMA has argued throughout that the Turner model stood a much better chance of delivering a successful personal account system than any of the alternatives that were put forward. We are pleased therefore that the Government has today accepted that advice.”

An ABI spokesman, while supportive of the measures to protect existing provision, says: “This is not a competition, this is about getting more people to save.”

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