Written Evidence to be reported to the House
Pensions Bill
12:00 pm
Stephen Haddrill: First, on the point about levelling down, there is going to be a risk of levelling down the more an employer has to decide and the more complex that decision is. If employers face a situation where, for instance, they are potentially going to end up with an existing pension scheme and having to set up a personal account, they are going to think quite hard about whether they want to carry on with an existing pension scheme that has a higher level of pension contribution from the employer than the personal account will do. We think that that kind of simplicity will mean that employers will keep their existing provision. At the moment, we have about 100,000 group personal pensions provided by the insurance industry, and the average employer contribution into those schemes is 6 per cent. There is £900 million going into those schemes every year, so that is an awful lot to lose if it is levelled down to a 3 per cent. personal account. That is very important.
If you will forgive me for going on for a second, the other issue is whether the personal account system is going to remain targeted at the people it is really designed for—those who do not have any pension provision at the moment and are on low to middle incomes—or it is going to draw in, as I am afraid that stakeholder did, a much better-off and more affluent person? Money speaks, and we fear then that personal accounts will get delivered for the people with more money. That is why we do not like the idea of high levels of contribution being allowed during the year—the Minister has given assurances on that, but we do not see that £3,600 figure on the cap actually on the face of the Bill. We would much prefer that to be in the Bill.
We do not see anything about transfers in from other schemes on the face of the Bill in terms of them being stopped, which is what we would like to see. I think that we should also be very cautious indeed about random lump-sum contributions—in fact, not allow them—into these schemes, because they will not be matched by an employer contribution and they will not necessarily be the right thing to do. This is an advice-free zone—rightly, we think, because of the cost—so people will be making mistakes, and, in 20 years’ time, liabilities will be laid at the door of the Government as a result. Rather a long list, I am afraid, but the points are important.