To ask the Secretary of State for Work and Pensions what the basis is for the increase in the projected cost of employed contributions to personal accounts from £2.6 billion to £2.8 billion, as set out on page 102 of the White Paper “Personal Accounts: a new way to save”. (113440)

The estimate was updated to reflect the availability of more recent data on the number of employees, and their salaries, that will benefit from the introduction of personal accounts.

The revised estimate is based on the 2005 datasets of the Annual Survey of Hours and Earnings and the Small and Medium Enterprise Statistics. The previous estimate was based on 2004 data.

To ask the Secretary of State for Work and Pensions what the basis is for the projected increase in set-up and running costs to employers of the personal accounts scheme as set out on page 106 of the White Paper “Personal Accounts: a new way to save”. (113441)

The Government have revised the estimate using the standard cost model to reflect refined assumptions about the detailed processes employers will need to undertake to set up and run a personal accounts scheme and the time that these will take (annex 1 of the regulatory impact assessment, “Personal Accounts: a new way to save” provides details).

As explained in the regulatory impact assessment, “Personal Accounts: a new way to save”, a degree of uncertainty remains due to the sensitivity of this estimate to assumptions made. The cross-government analytical group mentioned in the regulatory impact assessment, “Personal Accounts: a new way to save” (paragraph 4.104) has been set up and is continuing to work to refine these assumptions and estimates.

To ask the Secretary of State for Work and Pensions if he will reconsider his decision to set the annual contribution limit to personal accounts at a minimum of £5,000; and if he will commission research into the impact of a range of alternative contribution limits on existing pension funds. (113448)

The White Paper, “Personal Accounts: a new way to save”, was clear that this was an issue for further consultation and we look forward to receiving a range of analysis and views on this issue. The final decision will balance the twin aims of focusing personal accounts on moderate to low earners and allowing sufficient flexibility for individuals within the scheme who wish to save more.

To ask the Secretary of State for Work and Pensions what assessment he has made of the impact of the contribution limit of £10,000 in the first year of personal accounts proposed in the White Paper “Personal Accounts: a new way to save” on the level of saving between 2008-09 to 2012-13. (113572)

The Government are keen to create the right environment for retirement saving, both in the run-up to the implementation of automatic enrolment and personal accounts in 2012, and beyond. Following the publication of the White Paper “Personal accounts: a new way to save”, the Government are consulting on an annual contribution limit into a personal account of £5,000, in order to focus the new scheme on the target market. However, the White Paper proposed a higher limit, of £10,000, in the first year of personal accounts, in order to help any individuals with accumulated non-pension savings to consolidate that saving into their personal account. We will continue to work with stakeholders in the financial services industry and elsewhere in examining this and other ways of promoting saving in the period before 2012.

To ask the Secretary of State for Work and Pensions if he will estimate the impact on the final personal account pension fund of an individual on median earnings aged (a) 25, (b) 35 and (c) 45 of phasing in employer contributions to personal accounts proposed in the White Paper “Personal Accounts: a new way to save” over (i) four years, (ii) five years and (iii) six years. (113573)

The minimum employer contribution of 3 per cent. will be included in the primary legislation that establishes personal accounts. This minimum contribution will be phased in over three years: 1 per cent. in the year personal accounts is launched, rising to 2 per cent. in second year, then 3 per cent. in year three, which will continue in perpetuity. A three-year phased introduction of contribution will help employers adjust during the introduction of personal accounts, while enabling individuals to achieve scheme minimum saving levels as soon as possible.

The following table shows the impact of different phasing lengths.

Figures in the table are in 2006-07 earnings terms and are rounded to the nearest 100.

To ask the Secretary of State for Work and Pensions what assessment he made of the possibility of using a fixed annual management charge rather than one based on a percentage of fund size for personal accounts as proposed in the White Paper “Personal Accounts: a new way to save”. (113574)

Following their December White Paper “Personal accounts: a new way to save” the Government are consulting on the appropriate method of charging members for personal accounts.

We have received representations suggesting a number of alternative charge structures and, at this stage, are not ruling anything out or in.

As set out in paragraph 4.11 “Personal accounts: a new way to save”, the ideal charge structure for personal accounts would have the following attributes:

Simple and easy to understand (for example, easily comparable to other pension products in the market);

Fair to all members, taking into account an individual's ability to pay;

Incentivises the scheme operator to maximise the fund value;

Incentivises members to help keep costs down; and

Provides significant revenue in the early years of operation, thus reducing the amount and length of operating losses, and reducing financing costs.