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.”