Saving for pensions via the new personal accounts is not likely to benefit vulnerable groups, including many women, warns research commissioned by the Equal Opportunities Commission (EOC) and conducted by the Pensions Policy Institute.

The research found that middle income earners will receive a better return from saving into personal accounts than under the current pensions system.

But some groups, such as women with small pension savings and without full state pensions, could lose out financially by saving into Personal Accounts. This is because their pension savings would reduce entitlements to the means tested benefits they could have claimed if they had not saved.

The research has identified several characteristics that could put people at risk of receiving a poor return from saving into Personal Accounts, such as being a low earner and having a broken working record, as well as renting in retirement. Women are more likely than men to have these characteristics.

Caroline Slocock, the EOC’s chief executive, said: “More people with middle to low incomes need to save for their retirement and personal accounts are in principle a great way to help them.

“But our research demonstrates that it will not pay to save for many of those who need this help most, such as those women who can only afford to save a little because they are on low incomes or have broken employment records. This could damage consumer confidence and put the success of the government’s pension reforms at risk.

“Simple changes to pension rules could make all the difference and, though they come with a cost, the price is small if it makes the reforms work for women. Ensuring that personal accounts will benefit more people should encourage a greater number of people to save more.”

The EOC has identified two key changes to pension rules which would help people saving in personal accounts get a better rate of return. These are:

• Increasing the level at which people can take all their pension saving as a lump sum, rather than converting it to an annuity income (the trivial commutation limit) from £15,000 to £30,000




• Increasing the amount people are able to save when they retire without it affecting eligibility for means-tested benefits (the capital disregard limit) to £10,000, with a further option of introducing a new 10-year annuity product that would not effect entitlement to means-tested benefits.

Ian Naismith, head of pensions management development at Scottish Widows, said: “The government’s pension reforms are a huge step forward in helping ensure that everyone enjoys an acceptable living standard in retirement. However, the success of personal accounts depends on consumer confidence that it will pay to save for retirement, and the reforms currently proposed leave some of the population, including many women, who would be better off not saving.

“The EOC research proposes changes that would make saving worthwhile for more people, and deserves serious consideration as a way forward on an issue that has proved very problematic.”