Speaking at the Association of British Insurers’ conference last week, Osborne warned Government ministers against pushing the scheme ahead under its current format.
He said: “We have grave concerns about the potential for misselling to people who risk losing means-tested benefits by saving. You have got to deal with this danger of misselling, otherwise, this is going to be the next scandal in 10 years time and this industry and the Government ministers involved will be tearing their hair out saying, ‘How did we get this so wrong?’
“If you are selling to some- one who, as a result, is going to lose means-tested benefits, then you are in danger of misselling. Instead of ignoring that issue, it is fundamental to personal accounts and needs to be resolved.”
The Government was accused of sweeping the issue under the carpet after its savings incentives work programme, published in February. Its report claimed only 5 per cent of people will receive less than what they contribute to their personal account despite the fact 30 per cent may fail to benefit from the full 8 per cent contribution.
Osborne voiced concerns over the scheme’s operating costs – which the Government admits will be higher than originally claimed – and the risk of employers levelling down provision.