Reuters this week published news that the project to build the Government's new flagship 'personal accounts' pension scheme is already running horribly over budget.
The original budget was a not-inconsiderable £500 million, but Reuters' sources confirmed that it has already risen to £2 billion - and that is before anyone has actually started to build anything.
While B&CE is supportive of the concept of auto-enrolment and compulsory employer contributions at the heart of the personal account initiative, we are very worried about this news. Personal accounts must stand on their own two feet financially, and the benefits of achieving very low costs through a super-efficient scheme was almost the only reason for building the new scheme.
Now that the actual costs of building personal accounts is turning out to be many times what had been hoped, a rather bleak picture is emerging.
Either charges within personal accounts will be higher than those already achieved in schemes such as our own 500,000 member stakeholder pension - in which case what is the point of building personal accounts? Or, alternatively, tax payers are going to have to subsidise the costs of personal accounts. This would not only force the public to pay twice for their pension, it would also break rules about unfair advantage over the private sector pensions.
B&CE agrees that decisive action is necessary to encourage people who can afford to save towards their retirement to do so. But this kind of spiralling budget asks crucial questions about the sense in the action being taken. Is it not time to reconsider whether personal accounts will meet the objectives set out by the Pensions Commission?
John Jory is deputy chief executive of B&CE.
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