Fears providers will be reluctant to get involved in personal accounts were dismissed by pensions minister Mike O'Brien today, despite confirming the Government will not provide any start-up funding.
O'Brien says he is aware of providers' concerns following controversy surrounding stakeholder accounts in the past, but claims there is no need for alarm with personal accounts.
The minister says the Government will not give providers start-up capital which could encourage them to launch personal account schemes.
“The providers, if they wish to go into the market, will have to make their own commercial decisions," he says.
“I think there will be enough take-up. If you’ve got seven million people who want to invest money, there will be people who will want to take some of that money and invest it.
"I think it’s very likely, there’s a lot of money at stake here so let’s look at the bright side. There are a lot of people going to be investing a lot of money.”
Andy Tully, marketing technical manager at Standard Life, had raised the issue of provider involvement.
He told IFAonline: “There are concerns after what happened with the stakeholder accounts that these schemes may not be profitable and many providers will decide not to get involved.”
O’Brien also says the Government has yet to decide which existing schemes it will exempt from the personal accounts plan.
He says: “It’s important we have schemes that are focused on delivering a good quality pension.
"But the exemption needs to be pretty much self-certifying and the employer needs to know by a very simple test, he is able to know that his scheme is one which is acceptable and therefore it’s one of the ways in which we deter levelling down and seeing that an employer can self-reciprocate."
O’Brien also confirms personal accounts will come under generic advice. He says employees enrolled in personal accounts will receive generic advice as the detailed advice volume would create too big a financial strain.
He says: “I’m clear that what we cannot afford to do is burden the personal accounts system with some sort of detailed financial advisory mechanism that can cope on the individual basis for every possible element of the human condition.
"The cost of providing that would be substantial and it will not be something which we can do within the reasonable structure we set out for personal accounts.”
He suggests personal account scheme members may receive a letter setting out their implications of their decision to remain in the scheme and use a consultation website and helpline.
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