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THE Government runs the risk of facing a pensions mis-selling scandal if it fails to overhaul the state pension alongside its auto-enrolment reforms, a pensions group has warned.

The National Association of Pension Funds said there was a clear risk under the proposed system that workers who were automatically enrolled into their company pension scheme could miss out on means-tested benefits as a result of saving towards their retirement.

It is calling on the Government to avoid the problem by simplifying the basic state pension, so that it pays everyone around pounds 140 a week, to remove the need for means-testing.

From 2012, all workers will begin to be automatically enrolled into their company pension scheme, although they will retain the right to opt out.

Individuals will contribute 4% of their pay, with their company paying in 3% and the Gover nment topping this up with 1%.If employers do not have their own pension scheme, people will be enrolled into the National Employment Savings Trust or Nest.

But NAPF chairman Lindsay Tomlinson said: "Unless it tackles the means-testing trap, the Government faces a major mis-selling scandal.

"This will materialise a few years down the track, when a large number of people discover that being auto-enrolled into Nest has merely resulted in a reduction in means-tested benefits they would have received if they had opted out. This is potentially a big problem that we are storing up.

"The desperately needed simplification of pensions has to start with the state pension."
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Title Annotation:Business
Publication:Liverpool Echo (Liverpool, England)
Date:Feb 16, 2011
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