George Ladds, head of investment and pension research at Fair Investment Company comments on Pensions Minister Steve Webb's announcement that all UK employers should offer a company pension scheme or enrol staff into the new National Employment Savings Trust (NEST).
"I welcome the news, because it is important for everyone to save for their retirement. It is great that the government is insisting that all employers make pension contributions for eligible workers (those earning at least £7,475 a year) from 2012 - the suggested rate of 8 per cent (minimum 3 per cent from the employer) could make a real difference in retirement. But, I have concerns with NEST.
"I think for NEST Corporation to be able to afford to run the scheme, it is bound to have a limited fund choice and therefore offer poorer value for money compared with other pensions.
"I support pension reform, as the pension system in this country needs fixing, but NEST will not solve the issue. With auto-enrolment, the government is forcing people into a scheme that will almost certainly be a second rate option and is potentially opening up a future pension mis-selling scandal -if people discover 10 years down the line that their funds are not performing – who will be accountable? The employer? The government? NEST?
" What would be better is to insist that employers contribute into a scheme that they have set up or that their employees have chosen, not one the government has picked. I strongly believe the whole pension system needs a radical over hall – it needs to be made simpler. I have long argued in favour of combining pensions and ISAs and still feel this is the best solution."