Standard Life predicts setting up its personal accounts services could require up to 4,000 extra staff, as concerns mount providers will not be able to meet the escalating costs of the new pension system.
The provider says the Government’s personal accounts plans ask the industry to double capacity over night and the vast resources needed to set up the administration services will create a huge financial burden.
Standard Life, which will need between 3,000 and 4,000 staff, including 70 to 100 managers, says the practicality of setting up personal accounts could deter providers from entering the market.
The comments follow confirmation from Minister of State for Pensions Reform Mike O’Brien the Government will not offer start-up funding to providers.
O’Brien says he expects providers will put aside funding issues as the market of seven million potential personal accounts members will prove too attractive.
However, John Lawson, head of pension policy at Standard Life, is concerned about the gap which needs to be met.
“You wouldn’t find enough managers to administer this thing and then you’d have to pay over the odds. You’d have to think about whether staff would be prepared to move location. There is not enough skilled resource to do this in 2012 as that skilled resource doesn’t exist in the market.”
Ian Naismith, head of pensions market development at Scottish Widows, believes the Government should raise the 0.3% annual management charge to help providers make a profit and learn the lessons from stakeholder schemes which proved unprofitable to run.
He also says the personal accounts industry will rely on higher income earners putting a few hundred pounds a month into their pensions to generate sufficient returns.
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