Uncertainty surrounds the 'new' pensions

Published on Friday 11 January 2008 20:41

PENSIONS are set to undergo their biggest transformation in decades with the introduction of a new government scheme for "personal accounts" due to be introduced in the UK in 2012.

The Pensions Bill introducing these changes received its second reading in Westminster this week and the intention is that everyone should have access to a relatively cheap, easy-to-understand "personal account" scheme to which employers must contribute.

While this initiative seems a long time in the future, experts are warning that people should not neglect saving for retirement in the interim.

The Association of IFAs (AIFA) has written to the main political parties voicing its concerns about some of the bill's proposals. It said: "It is unacceptable that people who conscientiously save for their future could receive no benefit from being prudent. Because of means-testing, up to one in five future pensioners could effectively be worse off than those who choose to rely on state benefits."

AIFA is also worried that employers and employees will not be given professional advice on personal accounts.

Others point out there is still uncertainty on when and how personal accounts will be introduced and what they will look like.

Alasdair Buchanan, head of communications at Scottish Life, said: "Tim Jones, the new chief executive of the Personal Accounts Delivery Authority recently said he still needs to satisfy himself that all the work that needs to be done to design and build the personal account product can be completed by the target date of 2012.

"There is a concern that people might think all they need to do is sign up to this government initiative and their pension worries will be sorted out. That's certainly not the case. If that's all they were to do, they wouldn't be providing terribly well for the future."