Employees ‘hoodwinked’ into pensions

Modern workplace pensions are \" hoodwinking unsuspecting workers\" who do not understand them, according to Ros Altmann, the independent pensions consultant.

Speaking at a Pointon York SIPP Solutions round table event about the role of workplace pensions, Altmann said many people in workplace pensions have moved into something that is unlikely to be good for them, when means testing is taken into account.

Tom McPhail, head of pensions research at Hargreaves Lansdown, rued the fact that government had decided to go down the Personal Accounts and auto-enrolment route rather than simplify the basic state pension.

Geoffrey Pointon, chairman of the Pointon York Group and the steer for the discussions, noted the anachronistic nature of workplace schemes in their historical context, as a means for rewarding long service and looking after employees who typically joined at 18 and spent the rest of their working life at a company.

Altmann said: “Modern workplace pensions are just hoodwinking unsuspecting workers, who don’t understand, into something that is unlikely to be good for them.”

McPhail said: “There was a huge missed opportunity to simplify the basic state pension a few years ago which could have offered the opportunity for greater reform. The fact that we haven’t done that perhaps means that whatever we do from here is at best a compromise. Yes, it might have been expensive to reform the basic state pension, but I think that what we are going to face going forward is going to end up being more expensive.”

Pointon said: “Private enterprise shouldn’t give final salary promises because they’re never around long enough to match them. The truth is when you have corporate restructuring those liabilities are moved on, often to ever less sure hands.”