Personal Accounts will collapse when they are introduced in 2012 because too few employers intend to use them, it has been claimed.
The government's Personal Accounts scheme will fail because there will be insufficient take up when it is introduced in 2012, according to new research.
A study by consultancy firm Punter Southall found that just two percent of employers intend to bring in Personal Accounts, while 80 percent will continue to use their existing pension scheme. The company surveyed finance and HR directors, as well as pension managers, from more than 300 firms.
This slow take up will be insufficient to provide the low costs proposed by the scheme.
Personal Accounts were outlined in a government white paper released at the end of 2006 and the proposals were enacted in law by the Pensions Act 2008, although many measures do not come into effect until 2012. The scheme aims to "encourage and enable greater private pensions saving" through a variety of means, including placing a duty on businesses to automatically enrol eligible workers above the age of 22.
Damian Stancombe, financial management principal at Punter Southall, commented: "The scale of education and involvement of members must improve substantially. For instance, how many workers realise that a 40-year-old who begins to save ten percent of his earnings into a pension could expect to receive 25 percent of his annual salary as an income in retirement, but had the same individual begun saving at 26, his retirement income could have more than doubled?"
