Independent pension analyst Ros Altmann has warned of a future risk of litigation if the Government auto-enrols all workers into the National Savings and Employment Trust.
Altmann proposes that only those earning more than £15,000 should be auto-enrolled or the Government could face legal action from those who end up worse off by saving in the scheme.
In her response to the Department of Work and Pensions’ consultation on workplace saving, Altmann says just getting people to contribute small amounts into a pension will not solve the retirement income gap. She warns the Government could be lulling workers into a false sense of security if they believe saving 8 per cent of earnings will be enough.
She says low to moderate earners may be better off saving in an Isa to avoid means-testing penalties and raising the trivial commutation limit might help with this but may not be sufficient.
Altmann says: “The best way to tackle pensioner poverty quickly, especially for women, is to pay a decent universal state pension, as of right, to all citizens.”
She also suggests starting auto-enrolment with existing schemes to reduce the threat of levelling down and introducing a three-month delay before auto-enrolling employees.
Altmann says the 2 per cent charge will make Nest’s cost advantage weak and considers that investment and annuity risks have been underestimated.
Altmann adds: “If annuity rates continue to fall, then pension income will be hit, even if investments do well. Perhaps the Government should issue or underwrite annuities for Nest.”