NEST will fail millions - Altmann

The rebrand of personal accounts to NEST will not prevent the dangers underpinning the government-backed pension scheme, warns independent policy adviser Ros Altmann.

While other industry figures have welcomed the rebrand, Altmann is calling for an immediate halt to the workplace pension plan, saying it could spell disaster for millions of unsuspecting individuals.

She says NESTs are only continuing because they offer short term benefits to powerful vested interest groups with no regard for workers.

"Politicians will claim credit for getting more people to save in a pension. Employers will cut costs by cutting pension contributions back to 3% minimum. The Treasury will save money on future means-tested benefits and financial companies will earn fees on managing the money each year," she says.

Altmann, a former adviser to the Government on pensions policy, warns changing the name of Personal Accounts will not make them work any better.

"Indeed, by ploughing ahead with this project, regardless of the risks to the lower and middle earners they are aimed at, the Government is continuing to ignore the dangers of forcing workers into a pension arrangement that may not be suitable for them," she says.

Future means-testing, investment and annuity risks, levelling down, and cut-backs in existing pension coverage as a result of NESTs are "serious threats to future pension outcomes" which both the Government and the pensions industry are choosing to ignore, she says.

She gives the example of a worker earning £20,000 a year putting £50 a month into their NEST under the assumption this guarantees their future security is taken care of.

"The amount workers will be required to put into their pensions will not deliver much of an investment return. These people could discover, but not for many years, that their NEST merely replaced the means-tested state benefits they would otherwise have received."

Unless the scheme is abandoned immediately, Britain will end up paying for its failures for generations to come, she warns.

"If we do not abandon this project soon, we will waste even more money on a pension savings scheme not fit for purpose.

"If the Government is not honest about the risks then future taxpayers may end up funding compensation claims from workers who will explain how the Government misled them about the value and security of their pension savings."