Next week's Pension Bill will include the first step in setting up an independent Personal Accounts Delivery Authority , which will have a 'significant degree' of autonomy.
Speaking at the Association of British Insurers’ (ABI) ‘Saver Summit’, John Hutton, Secretary of State for Work and Pensions, outlined some of the responsibilities the new body will have.
He revealed the Personal Accounts Delivery Authority will be an independent body which will firstly “advise government on the design of the operational structure of these accounts and provide support to get the necessary contractual arrangements in place”.
In addition, he says the new authority - which “truly will be an independent arms length body” - will aim to use the “best experience and skills of the private sector to deliver the scheme”, while revealing the government intends to give it a “significant degree of autonomy in operational decision making”.
But he warns: “This is very much a first step. We will outline how we would propose to expand the remit and responsibilities of this authority in our personal accounts white paper next month.”
Although Hutton refused to be drawn on the details of the personal accounts paper, he confirmed it would include the final choice of model for the scheme and also announced whichever system is chosen, it will be delivered by the private sector.
He says: “Private sector expertise will be crucial to the success of personal accounts, which is one reason why the new delivery authority is so important. And we envisage that personal accounts will be delivered by the private sector.”
Hutton also announced the system of personal accounts should “strive to incorporate a proper opportunity for savers to exercise choice over the management of their fund” and confirmed this would be one of the principal responsibilities of the delivery authority.
In addition, he admitted: “There should be choice in personal accounts, and the model we should avoid is the one where all the decisions are made for the individual. Whether it’s branded or not will be set out in the white paper.”
However, in response to another question Hutton added: “I don’t think we should rule out the prospect of branded providers – but that would be a decision for the delivery authority a little bit further on.”
In addition, Hutton tried to allay industry fears over levelling down, saying the government needs to “guard against mission creep” by making personal accounts focus on their targeted market, as they are designed to “fill a gap” in the existing market, “not be a substitute for it”.
He adds: “We don’t want personal accounts to hoover up existing schemes. This isn’t a land grab into the pensions market by the state. If there’s a gap then let’s try and fill it, we don’t want to do anything else.”
But Hutton points out it is very difficult to predict the impact personal accounts will have as “almost all the predictions will be wrong” in some way, although he admits it will definitely have some kind of effect.
“It’s a very sensitive issue,” says Hutton, “but raising mandatory employer contribution levels is not a sensible solution. I do not believe it would be a sustainable position, as if we raised the level to 10% then there would be massive non-compliance, and costs would rise.”
“We’d be shooting ourselves in the foot, and the consensus we have would blow apart. There’s not a magic solution, this is an art not a science and it’s a case of just watching this space.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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