For immediate release: Tuesday 20 March 2007
A REAL OPPORTUNITY TO BOOST UK SAVINGS - IMA RESPONDS TO PENSIONS WHITE PAPER
In its response to the Pensions White Paper "Personal accounts: a new way to save" IMA welcomes the move to adopt the Pensions Commission's blueprint as the right approach to the question of retirement provision.
The Association believes that if the personal accounts system is to fulfil its potential to boost UK savings, its design needs to combine maximum simplicity for employers and employees, with a robust governance structure. The proposals in the White Paper are a significant step in this direction.
The response stresses the need to focus on the target market of those without access to other long term savings. It recommends keeping the annual contribution cap at the £3,000 suggested by the Pensions Commission, rather than raising it to £5,000 as suggested in the White Paper. In the absence of advice, a £5,000 cap would increase the risk of participants making inappropriate savings decisions, and expose future governments to charges of responsibility for that. The Government proposes that the limit should be reviewed in 2020, and IMA considers it much better to start at the lower level and judge the experience of the first years of personal accounts.
IMA argues that the majority of people are likely to be significantly better off in the longer term as a result of saving in personal accounts. The existence of means testing is no argument against encouraging millions of non savers to make provision for a decent retirement. But the Government needs to address the risk of small numbers of people losing out from the interaction of means testing with saving, and the IMA urges it to undertake further detailed analysis and to adjust the system as necessary between now and the introduction of personal accounts in 2012.
Richard Saunders, Chief Executive of the IMA, commented:
"Personal accounts have the potential to give a real boost to the savings culture in the UK. The White Paper proposals are a good start, and the vision of a high quality savings vehicle, independent of Government and focussed on its target market, can benefit savers and the wider savings industry alike.
There is still work to do to keep that focus on the target market and to get the interactions with means testing right, and we look forward to working with the Government to deliver those results."
IMA's response is attached.
For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898
Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332