Friday, 7 December 2007

Personal Accounts politicking

It's all getting a bit nasty in the debate about Personal Accounts. The Tories have called for Paul Myners to step down as chair of the Personal Accounts Delivery Authority after he had a bit of a go at Cameron and his buddies on Question Time. I think he was probably a bit unwise, but to be honest he is a shoot from the hip sort of person, and as he has pointed out he had a couple of digs at the Government on the same programme. So I hope he stays put.

What is a bit worrying for anyone who actually wants to see progress in pension reform is the extent to which the Tories are willing to play politics with Personal Accounts. As noted previously they have threatened to pull out of the cross-party consensus on the system. As I have mentioned I think this is in part because the Tories want to get the insurers onside, and they have used very ABI-like language in some of their recent comments.

One of these arguments is that low-paid employees who end up auto-enrolled into the scheme may be 'mis-sold' the pension, because it might disqualify them from means tested state benefits (ie they might have been better off doing nothing). I admit I am not up to speed on this but a) surely the inclusion of an employer contribution will mean it will be a no-brainer for most people and b) there must be a way of addressing the means test question.

In general it is good to see the industry that mis-sold approximately 1.7 million pension products - typically by encouraging people to leave occupational schemes to take out personal pensions when this was very obviously a bad deal - seems to have learnt its lession. But it is perhaps not in the strongest position to lecture.

Finally, I can't resist a bit of a bitchy dig myself. When the serious lobbying over the shape of Personal Accounts (or the National Pension Saving Scheme as it was called then) was taking place over the last couple of years, the ABI proposed something called a carousel (which became known, briefly, in policy circles as the 'carousel model'). Under this model if an individual did not pick a pension provider they would be assigned one from the carousel of approved providers.

I always thought it was a rubbish name for a proposal because it implies fun. Maybe this was intended to reflect the enjoyment the provider would derive from seeing thousands of guaranteed new customers randomly assigned to their pension product? But perhaps it was a more appropriate name than I realised. A carousel is, of course, where people pay to get taken for a ride.

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