The upcoming auto-enrolment Personal Accounts programme could damage pensions in the UK, it has been suggested.
A top pensions analyst at financial adviser Hargreaves Lansdown said that the scheme could lead to employers cutting their pension contributions.
This would in turn lead to workers retiring on smaller incomes than they might have done otherwise – increasing the likelihood that they will seek out other ways of supplementing their incomes such as equity release.
Personal Accounts are to provide a workplace pension for UK employees who are not otherwise covered by existing schemes.
The scheme will be auto-enrolment, meaning that workers will have to specifically opt out of making contributions.
Hargreaves Lansdown’s analysis follows comments from the shadow secretary of state for work and pensions Theresa May.
Addressing the Association of British Insurers conference last week, the top Tory said that she had "concerns" about the way the Personal Accounts programme was currently structured.
Laith Khalaf, pensions analyst at Hargreaves Lansdown, added: "Employers [could] just say, ‘I have to enrol another ‘x’ thousand people into my pension [scheme], what I’ll do is reduce the contributions I’m making for everyone’?
"Whereas there might be more people enrolled in pensions [in future], one danger is that some people who are already in pensions will find that their employer contributions are reduced."
Personal Accounts are to be introduced in 2012.
Posted by Richard Planner
