OWEN KELLY, the new director of Scottish Financial Enterprise, has warned that the government's proposed new Personal Accounts compulsory pension plan is potentially "anti-competitive" and, therefore, damaging to a vital subsector of Scotland's financial services industry.
With Paul Myners - the head of the Personal Accounts Delivery Authority (Pada), the advisory body established by the 2007 Pensions Act - due in Edinburgh next month to address a national conference on institutional investment, Kelly gave notice that SFE would be "watching closely" the emergence of the taxpayer-funded pension investment scheme, which he claimed could unfairly compete for business with a key Scottish industry when introduced in 2012.
"We are very conscious of the potential impact on the industry as a whole of the Personal Accounts pension plans,"
Kelly said. He acknowledged that the nationalisation of Northern Rock has raised sensitivity to the effects of state involvement in financial markets.
The insurance sector employs more than 22,000 people in Scotland, 1% of the Scottish working population.
"SFE will be watching the progress of the pensions bill at Westminster closely and will be looking to engage on the issues that have a particular impact in Scotland because of the importance of the pensions industry here," Kelly said.
"There is clearly a significant issue for Scotland in this.
"Our position is that the government seems to be setting up state-funded competition to a private sector that has a proven record of delivery. Making sure that everyone has a pension is an important public policy objective but we would argue that the means of going about it have almost just defaulted to throwing public money at it - state aid in other words."
Legislation to set up the Personal Accounts scheme, which reached committee stage at Westminster last week,
was instigated in 2006 after Lord Turner's pensions review.
Under the proposed act, expected to be passed by parliament this summer, from 2012 all employees over the age of 22 who earn more than £5000 a year will automatically be
enrolled into a personal account, or into their existing occupational pension plan if it offers better terms.
But the industry fears that, because the government plans to cap charges for Personal Account pensions, private sector plans may be made to seem expensive by comparison.
"They are worried about that the potentially low charges of the Personal Accounts, and the fact that people will be put into these schemes unless they actively opt out. This could be seen as an unfair example for a sector that needs actively to market its product," says one pensions expert.
Kelly added: "This is a major development. Marketing and administration costs that private business would have had to include in their business plan will effectively be met by the taxpayer. There may be a good public policy arguments for that, but I haven't heard them yet."
A Pada spokesman told The Sunday Herald:
"We want to see personal accounts as part of a thriving pension scheme market. Personal accounts are designed to complement, not replace existing pension arrangements and will target the seven million or so people who are currently not saving enough to meet their retirement aspirations.
"We are already consulting widely and in January we issued a consultation paper on the charging structure of personal accounts. We look forward to reading the response from the Scottish Financial Enterprise."
A spokeswoman for Aegon UK, along with Scottish Widows and Standard Life one of the Edinburgh-based insurance giants, welcomed the Personal Accounts scheme but said that reassurance was needed over potential negative aspects.
"We've been working with government and industry bodies to try to make sure the introduction of personal accounts will get more people saving more money rather than just spreading savings more thinly."
Paul Myners, the former Rothschild and NatWest banker and who was appointed by the former work and pensions secretary Peter Hain last July to chair the "arms length" advisory body, Pada, is scheduled to visit Edinburgh next month. He will address the annual investment conference of the National Association of Pension Funds, being held on March 5-7.
Kelly, a 44-year-old career civil servant, was formerly principal private sectretary to former first minister Jack McConnell. Following the Holyrood elections in May last year, he was briefly director of communications at the Scottish Government, assumed the leadership of SFE, the body that promotes the interests of the Scottish financial services sector, last November.
Brought up in Croydon, South London, Kelly is a graduate in Chinese of Edinburgh University. His father, originally from Cowie in Stirlingshire, was the former commissioner of the City of London police who set up the "ring of steel" in the Square Mile following the IRA bombings of 1992 and 1993.
The insurance sector employs over 22,000 people in Scotland, 1% of the Scottish working population.
enrolled into a Personal Account, or into their existing occupational pension plan if it offers better terms.
But the industry fears private sector plans may be made to seem comparatively expensive because the government plans to cap charges for Personal Account pensions. "They are worried about the potentially low charges of the Personal Accounts, and the fact that people will be put into these schemes unless they actively opt out. This could be seen as an unfair example for a sector that needs actively to market its product," said one pensions expert.
Kelly said: "This is a major development. Marketing and administration costs that private business would have had to include in their business plan will effectively be met by the taxpayer. There may be good public policy arguments for that, but I haven't heard them yet."
A Pada spokesman said: "We want to see Personal Accounts as part of a thriving pension scheme market. Personal Accounts are designed to complement, not replace existing pension arrangements and will target the seven million or so people who are currently not saving enough to meet their retirement aspirations.
"We are already consulting widely and in January we issued a consultation paper on the charging structure of Personal Accounts. We look forward to reading the response from the Scottish Financial Enterprise."
A spokeswoman for Aegon UK, along with Scottish Widows, Scottish Life and Standard Life, one of the Edinburgh-based insurance giants, welcomed the Personal Accounts scheme but said that reassurance was needed over potentially negative aspects. "We've been working with government and industry bodies to try to make sure the introduction of Personal Accounts will get more people saving more money rather than just spreading savings more thinly."
Paul Myners, the former Rothschild and NatWest banker who was appointed by the former work and pensions secretary Peter Hain last July to chair the "arms length" advisory body Pada, will visit Edinburgh next month. He will address the annual investment conference of the National Association of Pension Funds, being held on March 5-7.
Kelly, a 44-year-old career civil servant, was formerly principal private sectretary to former first minister Jack McConnell. After the Holyrood elections in May last year, he was briefly director of communications at the Scottish government. He assumed the leadership of SFE, the body that promotes the interests of the Scottish financial services sector, last November.
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