The insurance industry warned the Government yesterday against imposing a cap on pension charges, claiming it would be tantamount to "making promises it could not keep".
Publishing its response to the Pensions White Paper, the Association of British Insurers (ABI) said the actual level of charges for the Government's proposed personal pension accounts would depend on participation rates in the scheme, which could not be accurately predicted. Although signing up to one of the new personal pension accounts will be automatic for anyone not part of an existing and superior workplace scheme, employees will have the right to opt out.
Stephen Haddrill, the ABI director-general, said most people in the industry now agreed that Lord Turner's suggested annual charging target of 0.3 per cent was unrealistic. He said that it was increasingly accepted that pension charges would realistically be in the range of 0.6 to 0.7 per cent.
The ABI also called on the Government to allow the insurance industry to create and own a central clearing house to facilitate the new pension accounts, rather than outsource the work.It said the Government should also take steps to ensure that investment returns are standardised and more predictable.
The insurance industry's response angered consumer groups, who described the proposals as simply "an act of self-preservation". Doug Taylor of Which? said: "I don't accept that everyone's now said 0.3 per cent is unrealistic. Certainly if you look at the international comparisons, such as Sweden and the United States, it does not seem to be unrealistic."
Mr Taylor said he was appalled that so little attention had been paid to the consumer in the debate over the design of the new pension system. "To us, with all the mis-selling issues in the past, it's key that consumers' interests are put at the heart of this new system from the start," he said.
The TUC claimed the ABI had failed to prove its proposals were superior to Lord Turner's. "[These proposals] all fail the low- and average-paid beneficiaries of the new pensions scheme," Brendan Barber, the TUC general secretary, said. "Expecting competition to keep charges down among pensions providers would be a triumph of hope over experience."
The Government is expected to announce the final design of the personal accounts scheme by the end of the year.Reuse content