The Head of Pensions Strategy at Scottish Life has said that up to two thirds of people who would be auto-enrolled into the National Pensions Savings Scheme proposed by Adair Turner, would be liable for means testing. He has said that most people would be unaware that they were not saving enough to avoid the pension credit trap and would face a 40% tax charge on their savings. This could result in many complaints, as people realise that their money has been sitting in a scheme that leaves them financially worse off than today's system.
As this scheme would be government sponsored and unregulated, no one knows where these complaints would be directed. The Turner Report suggests that the basic state pension should increse in line with earnings instead of prices from 2010, which it believes would reduce the number of people on means-tested benefits, such as pension credit, but Scottish Life believe that this will amount to mis-selling as they will lose money in the long-term.
Our view
Whatever you get given in tax relief, they will always take it back.