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Consensus is solid against means-testing

A consensus has developed against the Government’s proposals for means-testing as part of the upcoming pension reforms, according to the Pensions Policy Institute.

Out of the 24 responses to the Government’s White Paper analysed by the PPI, only one is supportive of the proposed role of means-testing, with 10 supporting a further reduction and 13 not commenting.

Pensions minister James Purnell is adamant the Government’s proposed reduction of means-testing will be enough to encourage people to save into personal accounts although many industry commentators are concerned that this position means the scheme is fundamentally flawed.

The Department for Work and Pensions is due to publish its research into the proposed effects of means-testing soon and has promised to let the PPI scrutinise the figures.

On the issue of auto-enrolment, 11 organisations say they support the concept but have concerns about suitability, such as for people with low incomes, high levels of debt or people over a certain age.

Opinion is divided over model choice, with eight organisations opting for the NPSS, five for the branded proposition, three for a hybrid and eight not specifying.

For charges, 11 stakeholders call for flexibility to be allowed, six want a rigid 0.3 per cent charge cap and seven do not comment.

Seventeen of the responses support the proposed restoration of the earnings’ link, with seven not commenting and nine wanting the basic state pension to be raised above its current level, with 15 not commenting.

The report says: “There is widespread support for the principle of auto-enrolment but there are concerns about suitability for some individuals. There are also widespread concerns about the possible negative impact auto-enrolment could have on existing occupational pension provision. The Government needs to take these issues into account when designing personal accounts.”

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