Alexander said concerns about incentives to save caused by means-testing needed to be addressed if the Government wants to keep all parties on board. He said that unlike Conservative pensions spokesman Chris Grayling, he is not currently planning to vote against Personal Accounts in the House of Commons, but warns that unless more is done to address the means-testing issue, support could be withdrawn.
He added that without the support of all parties Personal Accounts would face a difficult future.
The Liberal Democrats propose removing the need for means-testing by introducing a citizen’s pension based on residency set at the minimum income guarantee. This would in part be paid for by the removal of higher rate tax relief on pensions.
Alexander said: “The incentives to save remain a sticking point for Personal Accounts. There is a real risk that unless the means testing issue is addressed that the Government could be guilty of mass misselling. There are certain categories of people for whom it does not pay to save.
“The Government cannot simply say people shouldn’t oppose elements of Personal Accounts because it could break the consensus. They have to address the legitimate concerns of all groups.”
