Personal Accounts 'Will Be A Disaster'

The government's plans to introduce personal accounts in the 2012 pension reforms have been branded a disaster in the making by an industry expert.

At a round table conference this week, an independent financial advisor said: "They will make pension provision worse not better."

He added: "I wish the industry would have nothing to do with it."

He also stated the only winners would be politicians - who will claim they have encouraged more people to save money for retirement, financial services providers - who will earn fees on managing the assets, the treasury - which will save money on means-tested benefits and big employers - who are currently generally contributing more than the three per cent minimum and will now be able to cut back.

According to Which?, anyone who is not a member of a company pension scheme in 2012 will be enrolled on the new initiative automatically.

The Personal Pension Accounts is the name for the new, government-backed, national pension plan, which will serve as a top-up for the current state system. It will affect all employees and employers, but the greatest impact is expected to be in the retail sector, in which company pension schemes have traditionally had a low take-up among staff. The new system will effectively force many workers to save for their pensions for the first time - and force their employers to contribute as well.

Your employer will have to either enrol you in a Personal Account, or put you into the company's existing pension plan, provided that the plan is as good as a Personal Account. Either way, if you do not want to be a member of a plan you will have to opt out.

As part of the process, members of pension plans who do not choose an investment fund for their Personal Account will have their pension monies invested in a Default Fund. It is anticipated that this automatic enrolment will significantly increase the number of people saving in a pension plan for their retirement.

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