Personal accounts costs may rise
Workers will be automatically enrolled into the new system
The cost of setting up the personal accounts pensions system may be four times estimates, the Association of British Insurers (ABI) has warned.
Stephen Haddrill, director general of the ABI, told the Work and Pensions Select Committee it could cost £20 to set-up an individual personal account.
The government had hoped set-up costs could be kept low at about £5.
Under the personal account system, to be introduced in 2012, auto-enrolled employees will pay-in 4% of salary.
This contribution will be toped-up by an additional 3% from employers and 1% of salary in the form of tax relief.
Employees will be compelled to join the scheme, unless they already have a good workplace pension or choose to opt out.
Higher costs
The system of personal accounts was originally proposed in 2005 by the government's Pensions Commission.
The Commission said set-up costs would be low and annual charges kept to about 0.3%.
However, the ABI has always said that set-up and running costs were likely to be slightly higher.
In response to the ABIs' latest comment, a spokeswoman for the Department for Work and Pensions said that it is "too early to provide further specific costings while the business requirements for personal accounts are being developed."
SOURCE: BBC NEWS 20/2/2007
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