personal accounts

Despite a general welcome for the white paper on personal accounts, several organisations are calling for a stronger focus on the role of advice.

Several organisations operating in the pensions market have welcomed government proposals for the introduction of personal accounts, announced yesterday, but have questioned whether it is possible to limit both charges and access to funds.

Transfers will not be allowed between existing schemes and personal accounts to help reduce the impact on existing employer pension provision, although this will be reviewed in 2020.

People aged between 22 and the State Pension Age will be automatically enrolled into personal accounts when they are introduced in 2012, if they are earning above £5,000.

Employers will be exempt from auto-enrolling staff into the national pensions saving scheme if already provide access to pension schemes which are equivalent to or more generous than the proposals set out for personal accounts, says the DWP.

The Pensions Commission's proposed National Pension Savings Scheme model is the best solution for delivering affordable personal accounts to boost pensions savings, today's White Paper concludes.

Fund choices in the personal accounts regime will to some extent be deliberately restricted because most consumers either do not want or do not understand choices put before them.

The government has admitted while it is confident the cost of personal accounts can be lowered as far as 0.3% over the long term, the true cost for employees "cannot be estimated with certainty".

Personal accounts will be classed as an occupational pension scheme and will be approached as a hybrid model, the DWP's White Paper says.

The government says introducing further pensions reforms in the form of personal accounts with an element of compulsion will result in an additional net £4-5bn in annual savings, equivalent to 0.5% of GDP.