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Vahey warns on subsidies for personal accounts

Aegon has hit out at Government claims that personal accounts may need extra state subsidies to ensure the scheme is not competitively disadvantaged by serving lower-earners.

Speaking at a House of Lords’ debate on the Pension Bill last week, Lord McKenzie of Luton said personal accounts will have a public service obligation to accept workers who the current market finds commercially unviable.

He said that this could put personal accounts at a disadvantage and cited European state aid rules which say there are some cases where it is right to compensate a body for performing a public service obligation.

Aegon head of pensions development Rachel Vahey says auto-enrolment means the issue of lower-earners will apply to any qualifying scheme and not just personal accounts. She says: “It is not necessarily true that only personal accounts will be at a disadvantage for serving lower-earners. Other schemes will be too and they will not get a subsidy. There is a misconception that private pensions only serve high-net-worth customers but they serve a whole range of people. The Government are allowing themselves a little bit more wriggle room by saying this. It is a subtle change of terminology but it is significant.”

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