The UK government's suggested reforms to create a new pension system will cause a scandal worse than the current mortgage endowment crisis, according to the Liberal Democrats party.
Cited in The Independent, Lord Oakeshott of Seagrove Bay, the Lib Dem spokesman on pensions in the House of Lords, stated that if the UK government’s system of personal accounts is implemented alongside its current proposed reform of state pensions, millions of savers would end up no better off than non-savers.
Furthermore, if the issue was not addressed, the new pension system could potentially develop into a pensions ‘mis-selling’ scandal, which would dwarf the mortgage endowment crises, he added.
Under the new pension schemes, the government plans to automatically enroll all employees into a pension from 2012 onwards. However, with a third of the population expected to be subjected to a means-tested pension benefit when they retire, savers will discover that they are no better off, or only marginally better, than those who did not save a penny.
David Laws, Liberal Democrat work and pensions spokesman, said: I fear that the effects of means-testing will mean that many of the people that the government wants to save more will be put off from these Personal Accounts. If this happens, the government’s whole pension reform plan will become a complete failure.
The Liberal Democrats have joined a number of campaigners to force the government to implement changes surrounding the means-testing, so the nation can save with confidence.