The Government's flagship pension scheme, aimed at encouraging Brits to save into a workplace pension should be halted, not just delayed, Dr Ros Altmann has claimed.
The claim comes after research from the Association of Consulting Actuaries (ACA) revealed that 59 per cent of employers intend to review their employee pension schemes prior to the Government's Personal Accounts scheme being launched in 2012.
The Government's Department for Work and Pensions has since suggested that Personal Accounts will not be fully functional until 2016, four years later than the 2012 launch date.
According to pensions expert Dr Ros Altmann, the threats and risks of Personal Accounts far outweigh the opportunities and benefits. Risks of the scheme include the fact that workers currently in an employer pension scheme with an employer putting in more than three per cent could end up with less pension if their employer switched to personal accounts.
According to Dr Altmann: "Politicians are only worried about people putting money in, and the financial companies also see tempting large pools of assets for them to earn fees on, but what matters is that the workers get good pensions out.
"No proper thought has been given to how the pension income will be achieved. Worsening annuity rates mean the current forecasts of pension outcomes are far too optimistic. Most workers cannot expect to get much pension from their personal accounts," she adds.
According to Dr Altmann, the proposed delay of Personal Accounts, "gives an ideal excuse to rethink the whole scheme, before even more time and money are wasted on personal accounts that, as currently designed, will actually damage private pensions for millions of workers, not improve them."
"This whole policy should be put on hold," Dr Altmann claims, "While a proper re-assessment is conducted. A nationally organised, low cost private pension scheme does have theoretical attractions.
"But in the current environment, it is not suitable. It also puts the Government at risk of being held responsible in future for people wasting their savings."
In fact, according to Altmann, the current state pension needs radical reform before new schemes are introduced. "Even after all the reforms have just enacted, nearly half of pensioners in future will be on means testing. This makes private pension saving unsuitable."
"ISAs may be a better product for many – especially those who are young, with large debts or who have not yet bought their own home."
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