No alternative to personal accounts

Responding to Shadow Work and Pensions Secretary Chris Grayling's speech on the future of personal accounts, TUC General Secretary Brendan Barber said: 'Personal Accounts are an essential part of the new pensions settlement. The auto-enrolment system cannot work properly without them for at least three main reasons.

'First auto-enrolment cannot work without a backstop provider who is obliged to provide a pension for every employer that has not found a private sector alternative. The system needs a provider of last resort.

'Secondly the whole system will not work in favour of consumers without a public sponsored not-for-profit scheme designed to keep costs down and set standards that private sector competitors will need to honour. Charges will inevitably drift up without one - mis-selling scandals have shown that competition does not create pensions that properly serve consumers.

'Thirdly there are doubts that the EU would continue to exempt auto-enrolment in private pensions from rules against inertia selling without the guarantee that personal accounts would set consumer friendly standards.

'Abandoning personal accounts would at best be a wholesale capitulation to pensions industry vested interests. At worst it would destabilise the whole system, leaving the country without a comprehensive pensions system.

'But we have every confidence that personal accounts can come in at 0.5 per cent costs or lower, and Mr Grayling's other conditions - such as reducing the interaction with means testing - could be achieved by a new government.

'What is being seen as a tough speech looks in fact to be an acceptance that a future Conservative government would keep the system that has won such wide consensus from consumers, employers, unions and experts, while keeping some options open to change the detail.'