The Government has committed to investigate the impact of means-testing benefits on the planned personal accounts, although industry experts claim this may have been left too late in the process of the Pensions Bill becoming law.
The study would look at peoples’ savings and how they will be affected by auto-enrolment into personal accounts.
Secretary of State for Work and Pensions, James Purnell, has confirmed that the Government is to evaluate the evidence around personal accounts, and consider the interaction between pension saving and income-related benefits in a reformed system, as well as looking at how people will be incentivised to save.
The Government intends to recognise the balance that is needed between alleviating poverty and incentivising savings, taking into consideration cost constraints. It has also pledged to share the knowledge in order to stimulate well-informed discussion on the issues.
John Jory, deputy chief executive of B&CE, said this is a positive step. “We are delighted the Government has confirmed publicly its plans to scope out the extent of the means testing issue and to explore potential solutions. This acknowledgement of the issue and commitment to taking it seriously is exactly what we hoped our lobbying would achieve.”
Steve Bee, head of pensions strategy at Scottish Life, however, has called for the Pensions Bill to be put on hold while the Government conduct this study. “The worry is that the presence of widespread means-tested support for the elderly could mean that it may not benefit people to save. It will be easy for people for people to work out that the scheme doesn’t provide good value for money and they won’t stay in it.
“I would have thought it better to put the Bill on the back burner while the Government go away and check just how many people are likely to be affected,” he said.
The results of the study are due to be published towards the end of the year. Chris McWilliam, senior consultant at Aon Consulting, said: “The timing of the study is nonsensical. With the findings of the study due out after the Pensions Bill becomes law, it could be a case of shutting the gate once the horse has bolted.”