Competing with the national pensions saving scheme
The Association of British Insurers want the cap on annual contributions to the new ‘Personal Accounts’ to be lowered from the £5,000 limit proposed by the Government to £3,000, to prevent competition in the mainstream market for pensions – where their members operate. This was in a new paper (19th March). They want the scheme to plug the gaps in pension provision but not to poach existing provision.
I take a different view. Personal accounts can do what stakeholder pensions were meant to do: subvert existing high-cost structures that result from market failures. Competition is not working – which is why stakeholder (which did rely on the industry) failed. The easiest and most certain way to increase the product of the nation’s savings is not to get people to save more. It is to stop the industry trousering so much of the contributions and investment growth. Subversive competition means better outcomes for ordinary people. The ABI has an agenda. It just is not ours.