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Government called on to identify risk groups

The Government is being urged to evaluate the impact of means-testing on pension personal accounts and improve the incentives for groups at risk of being worse off.

Pensions Policy Institute director Niki Cleal told delegates at a PPI means-testing seminar in London last week that the Government must find out how many personal account savers could suffer as a result of means-testing.

Cleal said: “The Government needs to drill down and identify who the people in these at risk groups are and what more can be done for them, either through providing them with quality generic advice that means they can opt themselves out of the system or looking to tweak and change the system at the margins to improve the incentives for those groups.”

She said the PPI has a fair understanding of who is at risk as a result of means-testing, pointing to people renting in retirement or low-earners in their 40s and 50s who have not yet started saving. However, she said that determining the number of people potentially affected is more difficult.

The PPI believes the people at most risk are those with marginal deduction rates over 80 per cent, which means that for every additional £1 of saving they would only benefit by 20p. In 2005, one in five people fell into this category and the PPI believes this figure will be similar in 2050.

Cleal said: “It is particul- arly a combination of housing benefit and guaranteed cre- dit that these people are likely to be eligible for. These are the people we really need to think about.”

She said these figures are only an attempt at gauging the scale of the problem and has called on the Government to publicise its own analysis on this issue so there can be an open debate.

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