Scottish Widows says introducing an initial charge on pension personal accounts could cut set-up costs by up to 75 per cent.In its response to the Government’s Pensions White Paper, Widows also says the proposed 0.3 per cent annual management charge needs to be at least doubled to avoid the danger of future cost increases or ongoing taxpayer subsidies. However, it admits the Government is unlikely to accept the Association of British Insurers’ proposal for no charge capWidows says a charge cap will give rise to a projected initial capital requirement of between £1bn-£2bn to establish personal accounts for between six and nine million people. It says an initial charge of the first month’s premium spread over the first 12 months of a personal account could cut the capital requirement by up to 75 per cent. Head of pensions market development Ian Naismith agrees with the ABI’s contention that it is impossible to set a charge before the industry has any idea of how many people will save in the scheme. But he admits the Government is unlikely to share the ABI’s confidence that there is no need for a charge cap because competition between providers will keep charges down. Naismith says: “I do not think there is a risk that competition will drive prices up but there is doubt over how much it could keep prices down.” Scottish Life head of communications Alasdair Buchanan last week raised fears that competition on personal accounts could cause huge losses for providers, similar to stakeholder. Naismith says: “I do not think there will be a price war as this would be commercial suicide.” He also says there is a danger that savings levels will deteriorate significantly prior to the introduction of personal accounts as a result of consumers delaying investing in a pension in the misguided belief that personal accounts represent a better deal. He says it is vitally important that personal accounts do not undermine existing savings levels and lead to levelling down of existing employer contributions, causing a mass exodus from employer schemes to personal accounts. Widows accepts the Pensions Commission’s proposed £3,000 contribution cap and says there will be no facility to transfer existing assets into personal accounts. It also argues that there should be a significant reduction in future levels of means-testing.