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Tories could ditch personal accounts

Conservative Shadow Work and Pensions Secretary Chris Grayling says the Tories would consider ditching pension personal accounts in favour of auto-enrolling employees to existing stakeholder schemes.

Speaking at an Association of Consulting Actuaries’ dinner last week, Grayling said the Conservatives are growing increasingly concerned about the costs of delivering personal accounts as the amount that the Government predicts the scheme will have to charge for admin has risen from 0.3 per cent to 0.5 per cent.

Grayling said: “If personal accounts do not break new ground in cheap, affordable pension products, there is no point in them. There is no point reinventing the wheel if what we get is going to look just like the things that we already have.

“The private sector spent vast amounts setting up stakeholder. Let’s not do all that again unless the res-ults really offer us something different.”

Norwich Union marketing manager Edmund Downes says: “Without some form of Government support, providers will not be able to meet the whole market need. The structure of personal accounts is not a bad structure.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “I can see the sense in what Grayling is saying. If the existing stakeholder system could be adapted to fulfil the principal requirements of the personal accounts scheme but at lower costs, it is a legitimate avenue to consider, as, with personal accounts, there are also the set-up costs for the taxpayer to bear in mind.

“I am deeply sceptical that personal accounts will deliver at 0.3 or even 0.5 per cent and delivering the cheapest solution may not be as important as financial education over the need for pension saving. It may well be better to have an informed and engaged investor paying 1 per cent than a blindly ignorant one paying 0.5 per cent.”

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