The Director General of the ABI, Stephen Haddrill, has called on the Government to raise the initial rate of employer contributions to Personal Accounts, from 1% in the first year to 3%.
Speaking at Punter Southall’s ‘DC: Deceptively Complicated?’ pensions conference, Haddrill says the move is necessary because the Government has been “wildly over-optimistic about the level of participation expected”.
He adds it should not expect to fall back on subsidies funded by the taxpayer to achieve the 0.3% management fee target.
Haddrill told the annual conference, attended by 150 pension fund delegates, that the annual contributions cap for Personal Accounts should be no more than £3000. He says this is crucial to ensure Personal Accounts serve their purpose of providing low cost pensions for people who do not currently save for their retirement.
The Government is likely to set a cap of £5000 but Haddrill warns this does not target the low to median earners at whom Personal Accounts are aimed.
He says: “It is not a tax dodge for the better off. If it becomes a tax haven – as stakeholder has become – it will be run for the wealthy”.
Haddrill also asked Whitehall to quickly clarify the details of the Personal Accounts policy to prevent uncertainty for both consumers and providers.
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