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The proposed system of personal accounts for pensions is four years away, but the number of voices raised against them rises by the day.

The proposed system of personal accounts for pensions is four years away, but the number of voices raised against them rises by the day.

Last week, Financial Adviser covered a debate hosted by Pointon York Sipp Solutions where several prominent voices sounded warnings.

Ros Altmann, a governor of the London School of Economics, also contributed to the debate describing them as the next mis-selling scandal. It seems that everyone can see the problems and difficulties except the government.

I do not think anyone would argue against the suggestion that most of the population should, in an ideal world, save more for their retirements. But if both the financial industry and consumers remain sceptical about the benefits of personal accounts, then they have no chance of success and we might as well shelve the idea now.

It is now up to the government to convince us that we are wrong and it is right. It is not going to achieve this through spin, PR and rhetoric.

Instead we must see concrete proposals to address the concerns and issues that have been consistently raised by those who know the financial sector, have considered the costs and understand the consumer far better than a bunch of MPs and civil servants who themselves can look forward to final salary pensions.

The incompatibility of asking low earners to save in order to deprive themselves of means-tested benefits such as pension credit and council tax benefit has been raised time and time again – yet the government refuses to address the issue.

There are also concerns for those in the middle-income bracket. The age allowance restriction means that those with incomes

of more than £21,800 start to lose their higher personal allowances giving them an effective tax rate of 30 per cent on a chunk of income.

So how can we ask them to save into a pension and receive 20 per cent tax relief, if they are to be taxed at 30 per cent on the income? This £21,800 might sound like a dream pension to many – but add the basic state pension to income from savings and other sources and some are bound to be tripped up.

Then there is the employers’ contribution. Most who understand pensions would

argue it is too small, but many employers would maintain the opposite. Can we therefore expect to see some employers pressurising their staff to opt out? Civil servants may claim it is not possible – but real workers fighting to get the minimum wage or their minimum holiday rights can tell a different story.

If these personal accounts are to have

any chance of success they must satisfy four key criteria:

The financial industry must feel they can afford to run them;

They must be as simple as possible so all parties can understand them and feel able to administer them;

Employers must be persuaded to contribute as much as possible;

Investors must be convinced that saving now will produce real rewards in the future.

So far the government has failed to convince me on any of these points. The clock is ticking and I am not optimistic about the outcome.

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After my rant last week about the length of FSA documents I was since delighted to pick up one which was short and to the point. This concerned inherited estates of proprietary companies and their use for paying mis-selling compensation.

It seems the FSA has decided that using a fund that belongs 90 per cent to policyholders is not an appropriate way to foot mis-selling bills. This is an undoubted victory for Norwich Union policyholder advocate Clare Spottiswoode and for consumer groups who have been campaigning over these estates.

Of course, this is a consultation, but it is a step along the road to greater protection for policyholders. It will not really have any effect on NU policyholders because by then the fate of its inherited estate should be decided. It will, however, mean something to those with other proprietary insurers . It could also provide an added layer of protection to those in funds that become closed to new business because a potential buyer will know they cannot dip into these estates for mis-selling.

But to a large extent this is another case

of the FSA shutting the stable door after

the horse has bolted. The vast majority of mis-selling claims on both with profits endowments and pensions have already been resolved. And the FSA appears blind to the pain of those trapped in with profits bonds.

And as Ms Spottiswoode said: “It is regrettable that the FSA has not seen fit to consult on other uses of the estate which I believe are not in the best interests of policyholders, such as subsidising the capital cost of writing new business or paying shareholders’ tax.” Quite.

Nevertheless, this is a positive step, so we I suppose we must not grumble too much.

Email.t.hazell@gmail.com