Is this our pensions saviour or a scandal waiting to happen?

Annie Shaw asks whether the new personal accounts will really turn us into a nation of savers

The Government is having yet another stab at solving the UK's pensions crisis. From 2012 people earning more than 5,000, who are not already members of a pension scheme offering superior terms, will be automatically enrolled into low-cost personal accounts

Employees will contribute 4 per cent of their salary into the scheme, and employers will pay in 3 per cent of earnings between 5,000 and 33,500. The Government will add 1 per cent. The idea is to get the estimated 12 million Brit- ons who are not saving enough for their old age to start to put money aside.

The Pensions Policy Institute (PPI), an independent research body, believes the reforms could result in at least four million new savers joining work-based schemes, and possibly as many as nine million.

Tom McPhail at independent financial adviser Hargreaves Lansdown says: "I have come on a long journey with regard to personal accounts. I started off as a sceptic but I am coming round to the view that they are largely a good thing.

"The most important thing is that they will bring about a cultural change, encouraging everyone to save up for their retirement."

Nevertheless, personal accounts are controversial, with critics arguing that some people saving into the account might be no better off in the long run as they could miss out on means-tested benefits like the pension credit. Because of this, the scheme has been dubbed by some as a mis-selling scandal in the making.

Steve Bee, head of pensions strategy at Standard Life, calculates that people could contribute up to 25,000 to a personal account and be no better off than someone who does nothing but is able to claim means-tested benefits. He says this could hole the system below the waterline."It seems so obvious that if people believe saving for retirement doesn't pay, they will stop doing it."

One way around this, according to the PPI, is to introduce an "income disregard", which would mean that income from pension saving up to a certain level is "invisible" to means testing. The PPI has published a study recommending that people should be able to keep the first 12 a week of their savings without it affecting their benefits.

Mr Bee wants to go further. "I'd like total disregard, where all pension savings are ignored in calculating means-tested benefits."

Some suggest the level of contributions at least 8 per cent of salary is far too little to provide a good retirement. But Mr McPhail says: "There's no reason why the Government could not ramp up the figures by 1 or 2 per cent at a time once the system is in place."

There is also the risk, though, of a "levelling down" in workplace pensions. The argument goes that once the accounts are introduced, why should some employers continue to offer schemes where they pay over 3 per cent of salary?