Reports and Briefing Notes

Are Personal Accounts suitable for all?

Auto-enrolment into private pension provision has potential advantages and should lead to an increase in the number of people saving for retirement. There is a broad degree of consensus for the principle of auto-enrolment. One concern that has been raised is whether Personal Accounts would be suitable for all of the employees who are auto-enrolled, either due to the interaction with the tax and means-tested benefit systems, or due to an individual’s particular circumstances.  

If Personal Accounts are not suitable for everybody, then this would not necessarily mean that individuals should not be auto-enrolled. But it would have important implications for what information is needed to help people make informed decisions about whether they should opt out. 

This report considers the interaction between the proposed system of Personal Accounts, state pensions, the tax system and means-tested benefits in detail in order to identify groups for whom Personal Accounts are likely to be suitable and those for whom they may not be suitable.

Chapter one describes the Government’s proposal to introduce a new system of Personal Accounts and explores the key concerns that have been raised.

Chapter two discusses the factors that would affect returns from Personal Accounts and what affects the minimum level of return that is needed for a Personal Account to be suitable.

Chapter three analyses hypothetical individuals who are in their twenties in 2012.

Chapter four analyses hypothetical individuals who are in their forties or fifties in 2012.

Chapter five considers the implications of debt and affordability on the decision about whether to stay opted in or to opt out of Personal Accounts.

Chapter six gives a summary and next steps.

Press

Executive Summary