The Government has made the startling admission that 650,000 people will not be a penny better off by saving into pension personal accounts.
In a written response to a Parliamentary question from Tory Shadow Work and Pensions Secretary Philip Hammond, pension minister James Purnell said the Government expects 6 per cent of “pensioner benefit units” will face “100 per cent withdrawal” in 2050.
Scottish Life head of pensions Steve Bee says this is a euphemism for 100 per cent tax on savers.
He says, based on these figures, 650,000 people will see their savings go up in smoke as all the money they save into personal accounts is clawed back through loss of means-tested benefits.
He adds that millions more people will have 40 per cent of their savings wiped out through meanstesting.
Bee argues it will be possible for people to save as much as 25,000 and not be a penny better off than someone who does not bother to save.
He says the Government should increase the trivial commutation limit from 15,000 to 60,000 so people would be able to reclaim their pension fund if necessary. He also backs the Institute of Actuaries’ threat to attack the weaknesses of the pension reforms if the Government fails to acknowledge the issues surrounding means-testing. The actuaries says if the Government feels it is acceptable for some people to lose out for the greater good it should declare this publicly, to protect the industry from misselling complaints.
Bee says: “This is a 100 per cent tax. There is a startlingly high chance that if you save into personal accounts your savings will go up in smoke. The Government has to warn people about this.”