Cazalet this week published calculations of retirement incomes derived from personal accounts, depending on different decumulation periods.
He found that, even excluding the impact of means-testing, many people are likely to receive low returns.
Assuming an investment return of 7 per cent and an annuity rate of 7.2 per cent and taking charges into account, total returns on contributions into personal accounts would range from 4.6 per cent to -20 per cent, depending on the length of time invested.
When means-testing is taken into account, the effects are “atrocious”, according to Cazalet, delivering negative returns in most cases.
Based on a means-testing reduction of 40 per cent, Cazalet’s research shows that returns on contributions range from 2.3 per cent to -27.5 per cent.
He says that many people will have even poorer returns due to contribution lapses.
Cazalet says: “If the Personal Accounts Delivery Authority or the Department for Work and Pensions were regulated by the FSA, this could never be launched because it treats customers very unfairly. If a provider launched it, the FSA would fine it to Kingdom Come. Many people would be better off putting their money in a teapot.”
Conservative Shadow pensions minister Nigel Waterson says: “This report shows there is a real risk that personal accounts will fail.
“We welcome the work programme that the Government is undertaking on means-testing but if the issue is not resolved, then it is a deal-breaker for us.”