Parties split on accounts funding

Senior pensions players are divided on how auto enrolment for personal accounts should be funded, a report from the Personal Accounts Delivery Authority has revealed.

On Tuesday, the authority published an update on its consultation into the charging structure of the project, revealing a split in opinion between those in favour of annual management charges and those who preferred a combination of annual management charges and one-off contribution charges.

Tim Jones, chief executive of the delivery authority, has admitted he prefers the combined approach, but stressed the latest document is simply a summary of reponses so far and offers no conclusive advice to government for personal account implementation in 2012.

According to the report: "Respondents identified two broad approaches to charging in the financial services industry.

"Although the discussion paper did not directly ask for a preference, most respondents did specify what they felt to be the most appropriate structure.

"There was no consensus view. For the most part responses were broadly split in favour of one of the following two options proposed in the discussion paper: an AMC-only structure and a contribution charge with an AMC."

Mr Jones said: "The second option brings in money faster. We have got an obligation to pay back setup costs."

However, he added: "This is not our advice to the government. That will not be published because it is confidential, but it will be given in stages."

Helen White, assistant retirement policy chief for Association of British Insurers, backed Mr Jones' support for combined payments.

She said: "Fairness and sustainability must be the basis for setting the charging structure for personal accounts.

"We favour a combined AMC and contribution charge, as this will not punish savers with dormant pension accounts, or those who have taken a contributions holiday.

"Combined charges are widely used in mortgages, mobile phone contracts and bank accounts. They will allow for the for the effective management of the significant set up costs of personal accounts."

James Jones Tinsley, an IFA for Leeds-based Pearson Jones, claimed he was torn between the "simple and transparent" AMC-only option and the combination which was more "sustainable" but also "complex".

Bruce Wilson, an adviser with London-based IFAs Helm Godfrey, said he favoured the combined charging structure.

He said: "Down the road it means that the AMCs will get lower. It makes a lot of sense."

Paul Myners, chairman of the Personal Accounts Delivery Authority, said: "We will take all the views expressed in the submissions into account when forming our recommendations to the department."