Industry bodies have expressed their concerns over the problems introducing auto-enrolment in 2012 will have on group personal pensions.
Speaking at a Work & Pensions Select Committee hearing on personal accounts yesterday, Stephen Haddrill, director general of the Association of British Insurers (ABI) and Richard Saunders, chief executive of the Investment Management Association (IMA), both highlighted the problems which could affect GPPs.
Haddrill points out the distance marketing directive is of particular concern as it effectively stops employers automatically enrolling people into occupational pension schemes.
He says the suggestions put forward by the Department for Work and Pensions (DWP) - employers might either secure a waiver from employees or provide advice to their workers - are not really practical.
“I don’t know what the solution is, but we need to find one, as these GPPs are good schemes providing higher employer contributions than the 3% for personal accounts, and we don’t want them to level down,” says Haddrill.
That said, Saunders says the measures proposed by the government to exempt existing schemes from the mandatory 3% contributions of personal accounts are broadly going in the right direction.
However, he says: “Although some of the wording in the white paper is a bit loose, as it is in other areas, the main problem is the potential advantage to GPPs which are becoming a very popular product.”
The ABI has also highlighted the potential problem of how personal accounts could be effectively regulated against possible mis-selling claims without a separate market with separate rules and regulations developing as a result.
He says the ABI has never favoured the approach of the detailed financial services regulation applying to this market as it would “kill the market”, however, he warns it doesn’t want an uneven playing field to develop as a result of the new scheme.
“We do fear employers may want to transfer out of the existing market and into the new market of personal accounts in order to avoid the regulation in the existing market,” warns Haddrill.
However, when asked if personal accounts should have a statutory exemption from mis-selling claims, Saunders argued he had difficulty understanding how mis-selling could actually apply to the new system.
He says: “As it is auto-enrolment there is no sales process [applied] to the individual, so I struggle slightly with the concept of how personal accounts could be responsible for mis-selling at the level of the consumer.”
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First mentioned in Cridland Report
Second acquisition of 2019
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