Letter published in FT on personal accounts reform
by Dr. Ros Altmann
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At last the political consensus around personal accounts is breaking down (Nicholas Timmins, 6 November). This proposal is a disaster waiting to happen. It must be re-thought.
Previous policies to encourage financially unaware workers to contribute to employer pension schemes have just ruined thousands of lives, when employees trusted official assurances that they were paying into safe pension plans, but then discovered their life savings were worthless. Rather than rescuing them and admitting their interests had been sacrificed for the greater good of others in company pensions, they were just abandoned. Government knew the inadequate regime could result in workers losing out dreadfully, but decided not to warn them and made no plans to compensate. The same is currently happening with personal accounts.
Even on the Government’s own figures, some 600,000 people in future could find their personal account gives them no pension – and these will be the lower earners who can least afford to save. Their pensions will merely replace state benefits. Colleagues who did not contribute to a pension will be better off.
The issue of suitability cannot be brushed aside. The Government must be honest with the public and make plans now to look after those who may lose out.
Ministers know that personal accounts, as currently conceived, may not be suitable for the millions of low paid workers potentially being automatically enrolled into them. Either they must be allowed to have their money back on retirement, or the pension from personal accounts must be disregarded from means-test calculations.
Ploughing ahead with the current plans is irresponsible and risks bringing misery to those who find they were duped into a scheme that delivers little or no value in future.
Dr. Ros Altmann
London School of Economics