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‘Graduate debt plight is being ignored’

Pension guru Bee believes that most people auto-enrolled in NPSS would fall into a tax trap

Up to two-thirds of the people who would be auto-enrolled into Adair Turner’s National Pension Savings Scheme would be liable for means-testing, says pension guru Steve Bee.

Scottish Life head of pensions strategy Bee says as Turner’s proposed scheme is not priced to fund advice, most people would be unaware they are not saving enough to avoid the pension credit trap and would face a 40 per cent tax charge on their savings.

This could result in a wave of complaints as people realise that they have been languishing in a scheme that leaves them financially worse off than today’s system. But Bee says that given the NPSS would be Government-sponsored but unregulated, it is unclear where these complaints would be directed.

The Pensions Commission claims that 30 to 40 per cent of the pensionable population would come under means-testing but Bee says for those people enrolled in the NPSS, it would be upwards of 50 per cent and could be as high as two-thirds.

The Turner report proposes that the basic state pension should increase in line with earnings instead of prices from 2010, which it believes would reduce the number of people on means-tested benefits such as pension credit, which the commission recognises act as a disincentive to saving.

But Bee says: “Selling a pension to anybody likely to be on pension credit amounts to misselling because they will lose 40 per cent or poss- ibly more through means-testing. Workers are going to be astounded by this. You cannot assume suitability in such an environment.

“What Turner is saying is that advice gets in the way of distribution but you have to be careful of sweep- ing people into an unsuit- able investment.”

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