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Warning of Terminal 5-style debacle

Conservative Shadow pension minister Nigel Waterson is warning that personal accounts could be a Terminal 5-style disaster if means-testing is not addressed.

Speaking at the Money Marketing Retirement Planning Summit in Monte Carlo last week, Waterson said personal accounts are not a “magic bullet” to cure pensions and warned of the unintended consequences of not sorting out issues such as means-testing.

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

He expressed concerns that employers will level down their pension schemes in line with the Government’s personal account proposals and employees will lose out.

Waterson 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, we will not have achieved anything.”

He also criticised 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 said: “There are a small number of people whose injuries are increased and even some people have died because they were wearing seatbelts.” However, 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 does not work as an analogy.”

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