B&CE warns of low personal accounts uptake

Government legislation could hinder the take up of the personal account pension scheme, warned John Jory, deputy chief executive B & CE.

Mr Jory, who heads up the largest and most successful stakeholder scheme, said the personal accounts delivery authority needed to overcome the same hurdles as those faced by the stakeholder pension plans and feared too much government red tape could hinder the scheme.

He said: "I have been working with Tim Jones, chief executive of the personal acounts delivery authority, as to the problems he may face. Ultimately, the scheme needs to overcome HMRC regulation as the bureaucracy could deter consumers. The plan is aimed specifically at low to medium income earners, which means pension pots will be small.

"As we have found these pots can often be abandoned with tiny amounts in due to the nature of low income work. However, rules currently in place say we have to leave these amounts, meaning pots of money are just sitting there inaccessible to both ourselves and HMRC.

"For those consumers who keep up with the scheme, there are a fair number who will end up with an amount below the £5000 mark at retirement. This is a concern as no commercial company will allow an annuity to be purchased below this figure and means these people are unable to access their fund on retirement.

"These rules need to be changed as you need to show consumers there is a clear advantage to saving for your future and at the moment this is not the case."

Mr Jory also said some investors had lost the right to means tested benefit once they retired because they had already invested in a pension scheme and were, therefore, just above the threshold.

Nick McBreen, independent financial adviser for Cornwall-based Worldwide Financial Planning, said the government needed to provide more information to both consumers and advisers.

He said: "There are too many unknowns in this equation and I do wonder how much planning went in to this scheme. It goes without saying we need to deal with the pensions shortfall but there are so many hurdles, not least those put in place by the government.

"Advisers are expected to already be informing potential clients about this scheme yet how can we? We do not know how it is going to work and we are wary of misinforming our clients."

Both HMRC and the department for work and pensions were unavailable for comment.