The Government’s automatic enrolment reforms risk a “major mis-selling scandal” unless the state pension system is reformed, NAPF chairman Lindsay Tomlinson warns.
A Department for Work and Pensions green paper outlining proposals for a flat-rate state benefit for future retirees, due to be published last year, has been delayed as Treasury officials attempt to reconcile issues of cost and complexity.
Tomlinson says under the current system people will lose out on means-tested state benefits if they auto-enrol into Nest. He says: “Unless it tackles the means-testing trap, the Government faces a major mis-selling scandal.
“This will materialise a few years down the track, when a large number of people discover that being auto-enrolled into Nest has merely resulted in a reduction in means-tested benefits they would receive if they had opted out. This is a potentially big problem that we are storing up.”
The NAPF proposes introducing a flat state pension of around £140 per week, combining the basic state pension and the second state pension.