Personal Accounts: good news on cap – more work ahead on details

Commenting on publication of the Government’s response to the consultation on the White Paper Personal Accounts: a new way to save, Stephen Haddrill, Director General of the ABI (Association of British Insurers), said: “The Government has responded to the concerns we had about its earlier proposals. It has taken the right decision in setting the contribution cap for Personal Accounts at £3,600. This will help to ensure that the new pension system is focused on its target market of low to middle earners.

“It is also a positive step that the Government decided there must be no taxpayer subsidy for Personal Accounts. This means that the potential for unfair competition, which would undermine employers’ commitment to existing good pension schemes, will be reduced.

“The ABI is committed to the principle of more savers, saving more for their retirement. Today’s announcement is a step towards this goal. But there is a lot more work to be done over the coming months and years to ensure that Personal Accounts and the existing pensions market complement each other. In particular, decisions will need to be taken to determine how auto-enrolment will work for existing pension schemes.

“It is crucial, in the run-up to 2012, that the Government encourages people to start saving now.”