Personal Account pension scheme delayed

by Gill Montia

Story link: Personal Account pension scheme delayed

The introduction of the Personal Account pension has been delayed for a year, meaning the government scheme will not be fully operative until 2016.

Personal Accounts are aimed at people who don’t belong to employers’ schemes.

They were originally due to be launched in 2012, although phased in over three years.

The target group is workers aged 22 and over with earnings of between £5,035 and £33,540, who are not members of occupational schemes.

Employers are uneasy about Personal Accounts because of the costs involved, both in terms of employer contributions and administration.

Once the scheme is fully up and running, employers will be required to contribute 3% of salary and employees 5%.

The Institute for Fiscal Studies (IFS) has recently criticised the whole concept, saying that workers likely to join will earn an average £14,000 per year, compared to £21,600 for other pension scheme members.

On this basis, those taking up a Personal Account would see an average annual contribution of only £900.

In addition, pensions experts have warned that employers could be tempted to “level down” existing occupational schemes and cut their contribution levels to 3%.

There is also a danger that workers on low wages could miss out on means-tested benefits later on in life by saving in a Personal Account.