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Good intentions do not necessarily lead to good effects and currently we are right to ask if they are they going to pave the road to hell through Personal Accounts.

There is nothing wrong with the government trying to raise the living standards of future pensioners while easing pressure on future welfare costs.

Offering workplace pensions to millions who would otherwise rely on paltry state provision is to be applauded, and the pensions industry is not complaining that the government is adopting the same defined contribution model we are recommending to employers.

The policy, as originally conceived, seemed a pretty good attempt to deal with a savings deficit in the UK and was based on experience of pension reform from around the world.

But then something was lost in translation and the whiff of gremlins was detected. The doubts have multiplied with the detail.

Critical flaws in the design and intended implementation of Personal Accounts are sending them way off course. There is still time to halt the slide before their introduction in 2012 but is the government listening? So far its consultation with stakeholders has been more of a peremptory chat. The industry’s long experience and thoughtful advice has not apparently dented political ideology and bureaucratic myopia one iota.

This matters for three very good reasons: the returns for people who will be automatically enrolled into Personal Accounts; the impact on those who are already in good employer-sponsored schemes and the potential economic fallout. Personal Accounts have the potential to be the ace in the hand but could instead bring down the UK retirement savings house of cards.

To ensure that there is no misunderstanding about what needs to change, here are some of the most pressing issues - in simplified form – for the rule-makers to chew on.

If the government seriously wants people to take responsibility for their own retirement needs, then supporting current employer-sponsored provision instead of undermining it is a must.

The new regulations for Personal Accounts are the usual fiendishly complex set of rules to be acted upon by employers who will be expected to meet deadlines or pay penalties. The proposed process for employees seeking to opt out of the scheme – and they may have to do it every three years – is unnecessarily complicated. The government has to decide whether it wants to simplify pensions or discourage any chance of understanding and support for them.

Auto-enrolment could and should have been used to raise participation rates in workplace pension schemes now, but ministers thought it is better to defer its introduction until 2012 when Personal Accounts come on-stream. Why? The government must resist the urge to compete with the private sector on pension provision. And concerns have been raised that the rules set by the department of work and pensions do not seem to be supporting a level playing field. Although ministers have stressed that Personal Accounts will supplement and not undermine existing pension provision, the government will be tempted towards mission creep in order to headline its success. The success of Personal Accounts should be rated on serving its original target market, those who were not saving – it should not count those members who join because their employer ‘levelled down’.

The exemption criteria for existing schemes are being set in a way that employers will find challenging, complex and time-consuming and that is likely to encourage many to give up and default into Personal Accounts. For example, the rules around initial contribution payments and their almost immediate vesting will mean that many members will opt out too late. Whereas this will have little impact on Pada, in the private sector an employer with high staff turnover will find a large increase in the number of deferred members with small pension pots – which will incur an increase in administration costs. Similarly, most schemes use some form of basic pay plus regular bonus payments as the definition of salary for pension purposes, but Personal Accounts requires the definition to apply to band earnings, which could be more expensive depending on your workforce. To offset increased cost, this will often mean a lower contribution being paid by employers into pensions. Hardly a successful result. Does the government want adequate retirement provision for all or is it just interested in cutting the state pension budget? Employers should be incentivised to stick with their existing provision or improve it.

Charges for Personal Accounts will have to be both acceptable to low income participants and sustainable. This is another aspect of delivery that could badly damage confidence in the scheme is if not well thought out in advance and it must be protected from constant reassessment. If the charging structure is subsidised by the taxpayer it is likely that this will adversely impact on charging for good quality private sector provision.

The government has not convinced the industry that means-testing will not be a problem. Put bluntly, it is simply not ethical to practically compel people to join a scheme and not tell them that they will be no better off in retirement than they would have been without a Personal Account. The media have been vocal on this issue and will encourage people to opt out of the scheme, and if that happens, it will become another Stakeholder-type failure.

Friends Provident and other various financial services providers are working hard to educate employees to save for their retirement and raise recognition of pensions as an employee benefit. Employers will not be getting a similar return on their contribution investment from Personal Accounts, so what will encourage them to improve financial literacy in the workplace? More financial education and advice is needed and delivery has to become smarter. Australian pension funds communicate with customers in many languages and US schemes have sophisticated approaches to segmented and personalised communication. In the UK, Pada seems to be moving in the opposite direction with one-size-fits-all delivery online in English and Welsh. The bare minimum will not do. Why would a government want to jettison the opportunity to improve financial literacy?

The primary aim of Personal Accounts should be to improve the financial circumstances of millions of workers who would not otherwise have access to retirement saving. Current planning should be tested to ensure that that will be the outcome. Personal Accounts will be introduced in a very different economic climate than the one from which the policy emerged. That does not mean they should not go ahead but the realities for low income earners will now be different and projections should be revisited. The three-year time period for employers and employees to reach the maximum contribution level of 7 per cent is too short - Australia took 10 years to reach 9 per cent – and may well push more firms towards closure. Personal Accounts will remove a large tranche of money from the economy just as companies begin to experience some recovery from the recession. There is a good case for joined-up government here.

As originally conceived, Personal Accounts are a good attempt to deal with the issue of encouraging people on low to medium incomes, or those in transient or self-employment. We have time to make changes but it would be better to delay implementation and get it right, than stick to targets and be left with something in that is not going to work - and actually will probably make things worse.

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James Ward is director of UK corporate for Friends Provident