The Government today promises personal accounts will "complement rather than compete" with existing pension provision.
In its response to a White Paper consultation on the new savings scheme, the Government says “a simple and straightforward exemption process for existing good quality employer pension schemes” will be just one way it intends to honour that promise.
The Government also unveils details of the workings of personal accounts, set to be introduced in 2012, and says new research suggests the scheme has “overwhelming” support.
Secretary of State for pensions John Hutton MP said on Monday personal accounts must complement existing good pension schemes and today the Government says it would.
Minister for Pension Reform James Purnell confirms: “It is important that personal accounts complements rather than competes with existing high quality pension provision.”
The Government highlights the way personal accounts will work, both up until its introduction in five years time and beyond.
It confirms personal accounts will be run as an occupational pensions scheme managed by a board of trustees.
It says the trustees will be advised by a members’ and an employers’ panel to ensure the voices of both individuals saving in the scheme and contributing employers are heard.
It also says there will be an annual contribution limit of £3,600 which will be uprated by earnings year on year.
Purnell adds: “We believe setting a cap at this level will allow personal accounts to remain focused on our target group of moderate to low earners who currently do not have access to a good pension.”
In addition, the Government says schemes like personal accounts have good support across the board.
It highlights research entitled Attitudes to Pensions which suggests 84% of people surveyed supported the idea of a national pension savings scheme such as personal accounts, and 68% supported automatic enrolment, particularly if there was an employer contribution.
But the report also shows that while most people recognise the importance of saving for their retirement, a third have never contributed to a private pension and 29% of people prioritise spending today over saving for tomorrow.
Secretary of State for Work and Pensions John Hutton says: “We know that people are far more likely to save for their retirement if they have access to a simple, low cost pension with a contribution from their employer. That is exactly what Personal Accounts will provide.”
An estimated six to 10 million people would save in personal accounts from 2012. The Government says Personal accounts will have low charges enabling people to keep more of their savings.
Employees will see their savings in personal accounts matched £1 for £1 by a combination of contributions from their employer and the Government. The employee will put in a minimum of 4% of their salary, the employer a minimum of 3% and 1% from the Government in tax relief.
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