The Department for Work and Pensions (DWP) has recently confirmed that they will not be using taxpayers money to subsidise personal accounts, and any charges will be borne by the account holder.
However, not everyone is convinced that the Government will not go back on this pledge and cross-subsidise. Standard Life head of pensions policy John Lawson, would like to see an inventory of costs created. He commented that it would be highly illegal for the Government to use the taxpayer’s money in an organisation that could compete with others.
Our view
Individual pension accounts are the new ultra low charge compulsory pension, that the Government plans to launch in around 4 years. The DWP stance to not cross subsidise, if it holds, will reduce the potential for unfair assistance in a competitive market. Pension companies who are inefficient will either need to improve efficiency, reduce operating costs or stay out of the market.