B&CE warning over personal account advantages - PP SHOW 2008

Deputy chief executive John Jory told delegates the introduction of personal accounts was to provide an alternative for employers who did not have good pension scheme for their workforce - and said it was vital they did not compete against good quality pension funds.

He explained the charging structure for pensions had dropped significantly over the last ten years - but noted the personal accounts aspirational rate of 30 basis points was unrealistic.

He said: "We have a challenge, but we have certainly seen charges on pensions drop significantly, however, 30bps rate is unachievable.

"Our own stakeholder pensions charge is down to 80bp, and when we move to a personal accounts world, we ought to be able to operate around 50bp."

Jory warned personal accounts must not have any advantage over good existing schemes, and expected the Personal Accounts Delivery Authority (PADA) to have to cover all the set up costs - which the Pension Commission estimated to be around £500m.

He said: "PADA have said personal accounts are going to be of the ‘plain vanilla' variety, so there is not going to be any of the add on extras that often add costs to pension schemes.

"There will be no transfers in or out, and there are obviously limits on contributions. Irrespective of what they are, it is important they do recover those costs."

Jory went on to say PADA must be liable to the same levies and fees commercial providers of pension schemes had to pay, and should not be allowed to operate in an advantageous position.

He added: "Anti competition and in particular EU laws, ought to ensure there are absolutely no subsidies in any way shape or form for personal accounts."