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UK government confirms personal accounts contribution caps

Following lobbying from the Association of British Insurers and others, the UK government has confirmed that it will ensure there are strict limits on the contributions that people can pay into personal accounts pensions, due to begin operating in 2012.

There will not be a higher contribution cap in the first year of personal accounts, and no facility to add lump sum contributions, although this will be reviewed in 2017. This decision will reportedly help to ensure that personal accounts stay focused on their target market of low and moderate earners, complementing rather than competing with existing private pensions.

Maggie Craig, the Association of British Insurers’s director of life and savings, said: It’s good news that the government has acted on this important issue. Enabling a higher first year limit, and the payment of lump sums into personal accounts, would potentially have damaged the existing pensions market and therefore hit the people who save in them.

We are pleased that the government has now taken the right decision. This is a good result for the millions of current and future savers in private pensions.