Personal Pension Account Plans Are Half Baked and Overly Complex

March 29, 2007 11:27 AM

Today the House of Commons Work and Pensions Select Committee published their report into Personal Accounts - one of the central pillars of Lord Turner and the Government's Pension Reform Proposals.

Commenting, Jenny Willott MP said:

"Simplicity is the key to an effective personal pension accounts system. But the Government's proposals are, in some areas, overly complex, and in others, only half-baked.

"Around half a million working age adults in Wales are not saving anything for retirement. Personal Pension Accounts are meant to ensure that everyone is starting to build up a pension from a young age to avoid poverty in retirement.

"The easiest way to ensure people save is by taking the money directly from employees' pay packets through PAYE. But the Government is proposing setting up a new system to collect pension payments, making the whole process far more complicated.

"People need clear, concise and unbiased information about the options available under Personal Accounts. But the Government has got no idea how to provide this yet.

"Instead, they seem to be leaving the window open for private firms to bombard people with bundles of leaflets advertising their own schemes. This will only add to confusion.

"What's more, the Government should be doing much more to encourage people to start saving now, not waiting until 2012 when the personal accounts begin. For a 25 year old on average wages, waiting until 2012 to start saving could see their pension pot reduced by as much as £36,000, around 20% - a sum which most cannot afford to miss out on.

"Personal Accounts are central to the future of pensions. Unfortunately, many of the problems the Committee have uncovered suggest that, unless the Government makes real changes to their plans, personal accounts could end up in a mess, like the CSA or the tax credits system.

"We need Personal Accounts to work - and ask the Government to reconsider some of the proposals. They need to be as simple and user friendly as possible."

To see the report click:

A recent survey carried out by B&CE Benefit Schemes showed that around 25% of the workforce is not saving anything for retirement.

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