Don’t cap people’s aspirations for a comfortable retirement

Putting a contribution cap on Personal Accounts would discourage people from saving for retirement, reveals Which?.

A new Which? report shows only 12 per cent of the target market for Personal Accounts believe there should be a limit on contribution levels. In fact, 70 per cent think there should be flexibility about how much can be paid in.

If a contribution limit were to be set, only 18 per cent of respondents support a level of £3,000 as proposed by the financial services industry, 42 per cent think the level should be at least £5,000.

If a low cap was applied, retirement savings could suffer, as 52 per cent of respondents said they would be put off saving more money by the hassle of having to open another personal pension.

As further evidence, over half also said they would be more encouraged to save for retirement if they could pay into one single pension scheme with no limit on how much they could contribute.

Emma Higginson, personal finance campaigner, Which?, says: “Personal Accounts must not fall at this hurdle. The absolute priority must be a scheme that is designed to enable people to save in line with their aspirations for a comfortable retirement.

“Any decision on the design of Personal Accounts shouldn’t be at the expense of the consumer.

“Our evidence is clear – consumers want a flexible Personal Account with no contribution limit and if there was a limit, only a minority favour a cap of £3,000.”

Of those respondents in the target market the vast majority believe that decisions surrounding a contribution limit should reflect the consumer interest rather than the needs of the pensions industry.