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Bee says Government’s NPSS claims are a myth

Pension guru Steve Bee says Government claims that NPSS savers will receive the equivalent of 8 per cent pension contributions on their earnings are a myth because they cannot save anything from the first £5,000.

Bee believes the calculations justify his fears of future widespread NPSS misselling.

Under current proposals, NPSS savers will have to pay in 4 per cent of their earnings, which will be matched by a compulsory 3 per cent emp-loyer contribution and 1 per cent tax relief. But under NPSS, the first £5,0044.52 of an employee’s salary to an upper earnings limit of £33,540 is not pensionable.

This means that someone on average annual earnings of £25,000 will only receive 6.4 per cent while someone earning £12,000 a year will receive as little as 4.6 per cent and will have to work for over 20 years to achieve a pension pot over the trivial commutation limit.

The latest calculation follows a “battle of the blogs” with Pensions Minister James Purnell over Bee’s claim that people in Personal Accounts could find up to 40 per cent of their savings clawed back through means testing on benefits.

Bee says: “The idea people will get 8 per cent is a myth. Most people saving at that level will not do anything other than surrender their pension pots for cash under the triviality rules decades hence if our present system of means-tested pensions credits are maintained.”

A DWP spokesman says “Enrolling employees into a low-cost savings vehicle like Personal Accounts could mean savers get a pension pot 25 per cent bigger than now. We estimate that by 2050, a regular saver on median earnings could be up to £50 a week better off than under the current system.”

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