Low-paid workers 'may not benefit from personal accounts'

Thu, 21 Aug 2008

Low-paid workers may be better off in their retirement without a personal account, it has been claimed.

Figures from the Department of Work and Pensions show that somebody earning an annual salary of £20,000 who contributed to a personal account for two decades could only add one per cent to their retirement income, reports the Financial Times.

The news provider states that means-testing for elderly people with small pensions reduces their incentive to save.

Niki Cleal, director of the Pensions Policy Institute, told the publication: "Not all of these pensioners will face a poor incentive to save in a pension but some of them will."

She added that individuals who plan to rent in retirement and who save for a pension may disqualify themselves from housing benefit and see low returns from their pension saving.

Meanwhile, David Dalton-Brown, head of Fidelity's direct business, recently warned that people saving for a pension could miss out on the benefits of consolidation if they do not use the new ability to transfer protected rights plans.
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