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Back to the drawing board

Quelle surprise – personal accounts, the government’s national pension savings scheme, will not be the panacea to old age impoverishment!

Personal Accounts Delivery Authority chairman Paul Myners has admitted it is "inevitable" that auto-enrolment means some people will be poorer because their means-tested benefits will be hit. Is anyone surprised? Certainly not pensions reform minister Mike O’Brien. He has recognised there will be winners and losers under personal accounts. But, he has always insisted, there will be more of the former.

And in a pure numbers game, O’Brien is right. More people will be contributing towards their retirement when personal accounts are introduced.

But how many people will be worse off?

New research from Fidelity International indicates at least 300,000 workers will lose out on existing scheme benefits when personal accounts are introduced. But it could be far worse.

On the positive side, only 7pc of firms plan to close existing schemes and replace them with personal accounts. That seems very encouraging, But Fidelity says nearly two-thirds have not started planning for personal accounts and 11pc of employers say that while they will keep existing employees in company schemes, new joiners will only be offered personal accounts.

Is the government really surprised? Closing existing schemes – defined benefit and defined contribution – to new joiners represents a huge cost saving for employers.

This year marks the centenary of the state pension and O’Brien claims the government is undertaking the biggest social reform in pensions in a 100 years. But does that mean setting the clock back 100 years?

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