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Money Marketing Retirement Planning Summit: Waterson warns personal accounts must not become next T5

Conservative shadow pensions minister Nigel Waterson has warned that if issues such as means-testing are not addressed then pension personal accounts could be the next Terminal 5 debacle.

Speaking at the Money Marketing Retirement Planning Summit in Monte Carlo, Waterson said that personal accounts are not a magic bullet which will solve the pensions crisis and warned of the unintended consequences if certain issues are not sorted out.

Waterson said: “We certainly do not want a Terminal 5 moment when it comes to personal accounts. My party wants this reform package to be a success but we don’t want to inherit a system set up to fail if we get into Government.”

Waterson expressed concerns that employers would level down their pension schemes in line with the Government’s personal accounts proposals and that employees would lose out.

He said: “It is not just a question of whether there will be more savers with the introduction of personal accounts. It is a question of whether there are more savings. If we are recycling the same amount of savings among more savers then we won’t have achieved anything.”

He also said that the Tories had urged the Government to cap annual individual contributions at £3,600 in order to prevent existing schemes from “mission creep”.

Waterson criticised the Personal Accounts Delivery Authority chairman Paul Myners for likening personal accounts to the use of seatbelts earlier this year.

At the National Association of Pension Funds annual conference in March, Myners admitted that some people with savings in personal accounts will be worse off when they retire due to the negative impact of means-testing.
Myners compared this with the dangers of using seatbelts in cars, saying: “There are a small number of people whose injuries are increased and even some people have died because they were wearing seatbelts.”
But he said the number of deaths and injuries avoided by using them outweighed the risks.
Waterson said: “The seatbelt analogy does not stack up. There are only 1,100 injuries a year attributed to wearing seatbelts and there have been no reported deaths from this. This is out of 35 million car users so it doesn’t work as an analogy.”

Waterson ended by saying: “Personal accounts may not be the complete answer to the pensions crisis but for now it is the only game in town.”

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