Personal accounts should not allow pension savers to fill gaps in their pensions by moving unlimited lump sums into the scheme, the Association of British Insurers (ABI) says.
The association rejected the idea of unlimited random top-up contributions at today's ABI Saver Summit, as it says employers would not match contributions.
The comment, made by the ABI’s director general Stephen Haddrill, follows the announcement yesterday of the details of the Pensions Bill.
The ABI also rejects the idea of a £10,000 special first year contribution, which the Bill does not rule out.
Haddrill says: “They(top-ups) are clearly not suitable, to use the FSA’s language. They may have been carefully invested with advice and will perform relatively badly if removed.
"Nobody wants the personal accounts regime to involve expensive regulated advice. But it should not take such sums without providing advice. If it does not it should incur the liability that comes with mis-selling.”
Haddrill also says such top-ups would attract the wealthy, which he says would undermine personal accounts’ objective.
He says unlimited top-ups, and the possibility that personal accounts could compete with existing pension schemes, would lead to the Government running the system for its benefit instead of the target market.
Haddrill also reiterated a commonly held view that the Government must exempt employers with good pension schemes from personal accounts, highlighting that employees in a workplace pension can expect over a working life to win a pension 60% large than if they relied on a personal account.
He warns Britain’s pension savings would drop by £900m each year if all employers chose personal accounts over their existing schemes.
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