Personal accounts are not intended to take over the pension world, chief executive of the Personal Accounts Delivery Authority (PADA), Tim Jones has said.
In a recent column for Professional Pensions, Mr Jones said: "Looking at recent media coverage, one would be forgiven for thinking that the personal accounts scheme is set to takeover the pensions sector from 2012."
But this is not the case, adds Mr Jones. In fact, the personal accounts scheme – due to launch in 2012 – is targeted at helping those without a current workplace pension in place.
"The personal accounts scheme is intended to provide access to a workplace pension for those employees who currently don't have access. This includes both employees whose employer offers no pension provision at all and, for example, those in industries with high turnover where employers currently restrict access to a pension scheme in early years of employment."
The scheme is being introduced to help employers to meet the legal requirement for them to provide a workplace pension scheme by 2012, which has come about as a result of The Pensions Commission identifying a gap in existing pension provisions.
In fact, the Pensions Commission discovered that millions of people are currently excluded from workplace pension schemes, particularly low earners and part/short term employees.
"There is therefore a clear need for a low charge, universally accessible pension scheme for low-to-median earners," Mr Jones recognises.
The personal accounts scheme will be run by a not-for-profit trust, which will allow it to be a low charge solution.
"Providing a trust-based scheme designed specifically for low-to-moderate earners, tailored for their risk profile, will, we hope, build confidence in pension saving among this group who may not have engaged with a pension scheme before," Tim added.
He concluded: "Our aim is to help facilitate a culture of pension saving among a part of the population that has not previously been engaged and to allow people to take some responsibility for providing for a more comfortable life in retirement to build on the basic foundation the state will provide."
Get expert pension advice »
© Fair Investment Company Ltd