James Purnell, Minister for Pensions Reform, has revealed the "frankly scary numbers" in a retirement survey carried out by Which? support the case for personal accounts.
In his latest blog entry on the Department for Work and Pensions (DWP) website Purnell says the findings of the 513 interviews reveal one in three people are not sure they will have enough to live on in retirement.
And the research, which was released earlier this month, shows there is a gap of around £12,000 a year between the amount people want to live on in retirement and what the basic state pension will actually provide.
As Which? argues on average people expect they to need around £312 a week after tax for a comfortable retirement, while the basic state pension currently only provides £84.25 a week for those with a full qualifying record.
In his blog Purnell points out these figures back up the “conclusions of the Pensions Commission, as well as our own analysis, which shows that millions of people are undersaving for retirement”.
“It was these, frankly scary, numbers that led us to propose personal accounts as an easier way to save”, says Purnell, adding he “wholeheartedly agrees” with comments made by Which? that the basic rule is people should start saving for retirement as early as they can.
He adds: “That’s precisely why our reforms are so important - they make saving both easier and more attractive. Automatic enrolment - whether into a personal account or existing workplace scheme - will help overcome the inertia that so often leads people to do nothing until it’s too late and they can see their retirement around the corner.”
In addition he argues the “minimum employer contribution and tax relief that personal accounts will attract means people’s contributions will be doubled before they even start earning any investment returns”.
However despite adding at the end of his entry that he would love to hear what people think, some members of the industry are failing to get a response, particularly over the impact means-testing will have on savers.
Steve Bee, head of pensions strategy at Scottish Life, continued his so-called ‘Battle of the Blogs’ with Purnell on 1 February by adding another response asking for answers about the level of care being taken of customers who will be auto-enrolled into personal accounts.
However so far Purnell has failed to respond and Bee has now posted an e-petition on the Prime Minister’s website entitled ‘ProperPensions’ which asks Tony Blair to “drop the Government's proposal to auto-enrol millions of people into a national pension savings scheme unless it can first guarantee that every pound saved in the scheme will make savers at least one pound better-off than non-savers”.
This follows Bee and Purnell’s arguments over whether means-testing is the equivalent of a 40% tax on people’s savings, and whether people should be better off opting out, and what advice will be available to help them achieve this.
So far 736 people have already signed up to the petition which will be live until the 20 April 2007.
In his own blog, the Beehive, Bee says: “You won’t be surprised to hear that I think it’s [the petition] another good way to get the message across about the dangers of the NPSS (aka Personal Accounts) being implemented with auto-enrolment in our highly means-tested environment”.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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