The Government has set itself up for a major row with the pensions industry, after going back on its promise that the new personal accounts system would not compete with the private pension sector.
At a meeting with several senior pensions industry figures on Wednesday, civil servants announced they would be pushing ahead with plans to force all existing pension schemes to prove that they offer employees a better deal than the new personal accounts system, which is to be introduced in 2012.
Under these proposals, companies will have to take all of their employees' earnings into account, including overtime, commissions and bonuses, when they assess what proportion of their income is going into their pension – a process pension specialists claim will result in an administrative nightmare. Although the Government had until now reassured the industry that it would do everything it could to preserve existing private pension schemes, pension experts claim its new proposals will lead to thousands of companies closing their existing schemes, simply leaving their employees to sign up to the national personal accounts system.
"Millions of low earners are set to lose out as a result of the Government's failure to listen to concerns on this issue," said John Lawson, head of pensions policy at Standard Life. The Government claims the new personal accounts will complement existing pension provision, but "appears hell-bent on destroying existing provision," he said.
A spokesman for the Department of Work and Pensions said no final decision had been made: "We have not shut the door on further changes, and discussions are continuing."Reuse content