In the second Pensions White Paper, the Government is proposing to increase the annual cap from £3,000 to £5,000, which is causing the Association of British Insurers some concern. They fear that the Government is trying to raise the cap in order to reach its low-cost claims for personal accounts.
Some industry commentators are claiming that by raising the cap, the national pension savings scheme, will not target the lower earners who are not currently saving for their pension as it was intended.
Our view
The Government is driving ‘compulsory’ pensions through. This is what the National Pension Savings Scheme is. The cap is irrelevant. If you are a low earner, you will still be required to pay in and your employer will still be forced to pay in. Whether there is a annual contribution ceiling is irrelevant for them. For higher earners, they can have other pension schemes anyway.