Government pension plans 'may not increase amount saved'

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Government pension plans 'may not increase amount saved'

Mon 19th Oct 2009

A sector commentator has suggested that the government's Personal Accounts initiative may not increase the amount of money in the pensions pot.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, commented that the auto-enrolment scheme may get more people signed up, but there is a risk that the amount being saved will not increase.

He made his comments following a speech by Theresa May, shadow secretary for work and pensions, in which she said that the fact that there will be only a one per cent minimum contribution level by 2015 is a mistake on the part of the government.

She accepted that the scheme must be phased in, but she stated that this level is too low and might reduce saving rates among some people.

Ms May added: "Such a slow start could undermine the credibility of the whole project and leave millions of people facing a gap in contributions that they might never make up."

In her view, employers could decide to reduce defined contribution levels, rather than place renewed focus on saving.

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