The Association of British Insurers and the Investment management Association MA have written a joint letter to Work and Pensions Secretary James Purnell to clear up the confusion after Labour minister in the Lords, Lord McKenzie denied that a limit had been put in the Pensions Bill despite Purnell insisting the annual limit would be capped at 3,600.
At the annual ABI chairman’s dinner on June 4, Purnell said: “We are determined that personal accounts will complement rather than replace existing employer schemes. That is why we put in an annual limit for individuals in the personal accounts scheme of 3,600. And that is why we have said there will be no transfers to and from existing schemes to personal accounts.”
But during the second reading of the bill on June 3, McKenzie said: “We have not put the amount of the contribution limit in the bill, because we want to allow the annual contribution to operate flexibly. The wide enabling powers will allow for the higher contribution limit in the first year of the scheme’s operation and for a lifetime lump-sum contribution to run alongside the annual contribution limit.
We need to consider whether to introduce this additional complexity when the scheme is introduced or wait for the review of the contribution limit in 2017.”
The ABI and the IMA are keen to cap annual contributions at 3,600 in a bid to limit the effect that personal accounts have on the private sector.
ABI spokesman Jon French says: “We have sent a joint letter from ABI director general Stephen Haddrill and the IMA’s Dick Saunders to James Purnell, seeking clarification of this point.”