While auto enrolment into occupational pensions is broadly supported by the pensions industry, the ongoing conflict between means tested state benefits and the introduction of personal accounts has not been sufficiently addressed.
John Jory, deputy chief executive of B&CE Benefit Schemes was among many who said that the fact that the majority would benefit from auto enrolment was of no consolation to those who would be worse by being forced into saving into a small pension fund.
“The government is doing no-one any favours by trying to sweep the means testing issue under the carpet,” said Jory.
Pensions expert Steve Bee expressed “extreme disappointment” at the lack of progress the government had made in tackling the 5% who would not benefit from auto enrolment and could be better off on the means tested state benefit. He said: “This is a missed opportunity – there’s potentially 600,000 people who, having been auto enrolled into personal accounts, could stand to lose the value of their own contributions.”
Laith Khalaf, pensions analyst at Hargreaves Lansdown called for the government to make it clear that the public could not rely on the state for a comfortable retirement. “The means-testing system is not immutable and will evolve over time; it is not sensible for people to rely on this system being in place in 10 or 20 years time,” he said.
John Lawson, head of pensions policy at Standard Life agreed, "I acknowledge that means-tested benefits were and still are necessary to keep pensioners above the poverty line, but continuing to signal that future pensioners will be bailed out in the same way creates moral hazard amongst today's workers, meaning that many who should save will not.”
Paul Macro, a senior consultant at Watson Wyatt, suggested that the government's comments on means-testing amount to little more than “move along, there is nothing to see”.
“That's because anything they could do to reduce the penalties for saving would involve either spending more taxpayers' money or increasing benefits for poorer pensioners less quickly,” said Macro.
Keywords: means testing, personal accounts, pensions, government, auto enrolment, 2012
