The consultant said its survey - which interviewed HR directors, finance directors, and pension managers from over 300 companies - revealed personal accounts were likely to be a failure when they are introduced in 2012 as the take up rate would be far below the economy of scale needed to deliver the proposed low costs.

It said such a scenario would make management fees for personal accounts as high as 1% - far more expensive than most current defined contribution pension schemes.
The survey also revealed only 10% of employers have canvassed the opinions of their staff to understand whether the benefits that are available are valued or even appropriate - and noted less than one quarter of pension members invest outside of the default option in 68% of schemes.

The scale of education and involvement of members must improve substantially for these schemes to take off. For instance, how many workers realise that a 40 year old who begins to save 10% of his earnings into a pension could expect to receive 25% of his annual salary as an income in retirement, but had the same individual begun saving at 26, his retirement income could have more than doubled?

Meanwhile relevant and quality investment options must be created that fulfil people's needs and offer them security. The survey shows that for most schemes, over 75% of members invest in the default investment option, which is often not an appropriate choice. Sadly this has been proven recently, as during the last past twelve months the average fund in the balanced managed sector has dropped by 19.8% and a passive fund tracking the FTSE 100 has lost 31.3%.

However, The Personal Accounts Delivery Authority (PADA) said it did not expect huge numbers of companies with existing provision to use personal accounts across their workforce - noting it was designed to complement their existing provision.
PADA said a major part of our customer base would come from employers without existing provision - but added the scheme may also be useful for certain groups of workers within larger firms, such as those on short-term contracts or in sectors where there is high turnover of staff.
PADA said it was on track to implement personal accounts in time for the onset of employer duties in 2012 - and estimated the scheme would deliver a good quality pension with a low charge of around 0.5%. We shall see……….