The Association of British Insurers (ABI) and the Investment Management Association (IMA) have written to pensions minister James Purnell to ask for clarification on the limit that employers and employees can contribute annually into personal accounts from 2012.
James Purnell said at the ABI chairman’s dinner on 4 June that the limit would be £3,600. He said: “We are determined that personal accounts will complement rather than replace existing employer schemes. That’s why we put in an annual limit for individuals in the personal accounts scheme of £3,600. And that’s why we’ve said there will be no transfers to and from existing schemes to personal accounts.”
However, Labour peer, Lord McKenzie disagreed during the second reading of the Pensions Bill in the House of Lords on 3 June. He said: “We have not put the amount of the contribution limit in the bill, because we want to allow the annual contribution to operate flexibly.
“The wide enabling powers will allow for the higher contribution limit in the first year of the scheme’s operation and for a lifetime lump-sum contribution to run alongside the annual contribution limit. We need to consider whether to introduce this additional complexity when the scheme is introduced or wait for the review of the contribution limit in 2017.”
The ABI and the IMA would prefer that a contribution limit was set on personal accounts because they believe the new scheme could have an adverse effect on the private sector.
A spokesman from the ABI said:†”We’ve asked for clarification over the apparent contradictions in the two statements, and set out or view that it is vital to the success of pension reform that the existing private pension market is not damaged by personal accounts, which could easily happen if there is no contribution cap.”