Standard Life has slammed today's Pensions Bill which says the Personal Accounts Delivery Authority (PADA) would help and advise the Secretary of State for causing "conflicts of interest".
The Bill says PADA would operate personal accounts but would also set the test by which good schemes become exempt.
John Lawson, head of pensions policy at Standard Life says: "This is a clear conflict of interest. Suspicions were raised when Paul Myners gave evidence to the Work and Pensions Select Committee on 17th October - these suspicions are now confirmed by plans to turn this conflict of interest into law.
“If PADA is to have a duty of good faith towards existing schemes, where are the targets? For example, should PADA have a target to ensure that over 90% of good schemes remain in place after 2012?"
Standard Life also raises concern over plans to reduce the revaluation rate of deferred benefits.
Currently schemes must increase pension entitlements of members who have left defined benefit schemes in line with RPI, capped at 5%. The Government has reduced this cap to 2.5% for benefits built up from a future date.
The original independent report recommended leaving this cap unchanged. The Bill does not mention an implementation date but Standard Life expects the Government to set it for some point during 2008.
Andrew Tully, marketing technical manager at Standard Life, says: "These changes mean people will see pension benefits built up after this future date eaten away by inflation.
"Reducing the pre-retirement revaluation rate for these benefits to a maximum of 2.5% will see deferred benefits slashed in real terms, particularly if inflation continues at current levels or higher.”
Standard Life says a man aged 45 leaving his company of 15 years with a final salary scheme after earning £40,000 would receive £10,000 in pension benefits.
Under the current rules, with an assumed 4% inflation over the next 20 years, his benefit would grow to £21,911 at age 65.
However, his benefit would only increase by 2.5% each year, and would grow to £16,386 at retirement under the proposed rules, creating a £5,525 loss, the provider says.
Standard Life also questions Pensions Bill proposals to give the Pensions Regulator powers to fine employers up to £50,000.
The regulator may impose fines if employers do not make payments into personal accounts or do not automatically enrol, or re-enrol, eligible employees into personal accounts.
However, Standard Life says the Bill does not make it clear how pro-active that regime will become.
Tully says: “Given the cost restrictions within the personal accounts charging structure it may be a 'light touch' regime relying on whistle-blowing from employees and the threat of hefty fines for employers.
"This type of regime may offer scope for unscrupulous employers to persuade employees to not join - either by threat or inducement.”
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