It's the same every year. The frantic build-up. The hive of activity, with people running around planning and preparing. Making lists, checking things off. And then the dawning of the big day itself, with the anticipation of what may come. The pleasure of unwrapping and peeking inside, only to be disappointed once again that no-one really listened to you when you told them what was needed.
Another Christmas, another government consultation. This one issued a couple of weeks before, to give us something to read with the turkey and mince pies.
It was the turn of the DWP this time with its enthralling 164 page read entitled Personal accounts: a new way to save. This sets out how the Government sees personal accounts working in practice from 2012.
The headline news was that it has decided to go with a centralised delivery model for personal accounts. We at Aegon lobbied for the ‘branded provider model’ (or at least a variant of it) as we believed – and still do- this would have been the more effective and less risky way to deliver a new low-cost pension to market. But now the government has made its choice we have to work with it to make the design as effective as possible.
This could be the chance to create a distinct personal account market running in parallel with existing pension saving. But government needs to understand that two flourishing markets – one based on personal accounts, one based on the best of today’s pensions – are needed to boost overall pension provision going forward. And we need to make sure that what’s good in today’s market thrives, both now – in the run-up to 2012 – and after personal accounts are launched.
On the surface, the Government seems to have taken note of our concerns about levelling down. But this is the time to delve deeper and question whether the package of proposals it has put together on things like good scheme tests and quality marks is actually robust enough to combat levelling down in practice. Many of these proposals are still open for consultation, so this is our chance to get the design of future pension markets right.
One of the most worrying statistics in the white paper is the Government’s estimate that only 60% of personal account money will be new saving. We all need to work to increase that figure to much closer 100%. Otherwise, personal accounts will just move money around, and run the risk of turning into the pension equivalent of a Christmas gift of a pair of new socks. Not asked for, and not needed.
Rachel Vahey is head of pensions development at Aegon Scottish Equitable.
The views expressed are those of the author and not those of the company she represents.IFAonline
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