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Personal accounts to hurt pension provision?
13 March 2008 12:00
The forthcoming launch of personal accounts could have a negative impact on existing private pensions and cause mass confusion among providers, a new report has warned.
Over one in 20 finance directors said that they would close existing schemes and replace them with personal accounts when they are introduced in 2012, Fidelity International's study showed, which would mean around 300,000 people losing their existing pensions.
A further one in nine firms are to let new staff join only these accounts, while although over half deemed that their defined contribution schemes will not provide an adequate retirement income, they all offer higher contributions than personal accounts would.
Even more worryingly, over three out of five companies have not started planning for the arrival of this new system and one in ten have not even heard of it, yet almost four out of five will have to participate in it under their current circumstances.
Fidelity's Simon Fraser argued that while the government intended personal accounts to complement existing pension provision, it is instead likely to supplant it and he insisted that action needs to be taken now to reduce the risk of the pensions crisis worsening.
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