Millions of workers would be better off opting out of Personal Accounts, the Government’s new pension savings scheme, a report to be published on Monday will conclude.

The report by Ned Cazalet, the independent life assurance analyst, will say that many individuals would gain nothing by investing in the scheme, which is scheduled to start in 2012.

The National Pensioners Convention (NPC), the UK’s leading pensioner organisation, has seen the report and backs Mr Cazalet’s findings. Dot Gibson, NPC vice-president, said: “Mr Cazalet has blown the lid off what is another pensions scandal waiting to happen. The Government thinks it can get millions of low-paid workers to risk their savings on some kind of pension lottery, in which many will lose out. Rather than adopt this casino approach to retirement, we should be strengthening the state pension system to give everyone a guaranteed income that will take them out of poverty.”

The problem is that there is currently a gap between the maximum weekly amount paid to a single person as a state pension - £90.70 - and the minimum (means-tested) weekly income that each single pensioner is guaranteed to receive — £124.05 People putting money into personal accounts would only start to see some benefit from it if their resulting pension pot generated weekly income greater than the gap between their state pension and their guaranteed weekly income.

The current gap is £33.35 a week, or £1,731 a year, and to generate that level of income would require a pension pot of about £30,000. Anyone not building up a pot of that size would lose out because they would simply receive the minimum weekly income anyway and their savings in personal accounts would have effectively been wasted. They would receive the same level of income if they had made no savings at all.

Critics of the scheme, such as the NPC, say many low-paid workers will simply not be able to build up a pension pot of anything like £30,000 - the sort of level at which they would start to see some benefit from their savings. On top of that the crucial gap between the state pension and guaranteed weekly income is likely to vary from year to year, so it will be impossible for workers to calculate many years in advance whether it would be worthwhile to put money into personal accounts.

Personal Accounts have been designed for individuals without an existing occupational pension scheme. The idea is that they would pay at least 4 per cent of their salary into the scheme, with employers contributing at least 3 per cent and a further 1 per cent coming from tax relief. Individuals would be automatically enrolled into the scheme but would be allowed to opt out if they chose to.

Minister for Pensions Reform Mike O'Brien said: "Means-tested benefits won’t meet most people’s aspirations for later life, which is why they should save, and save early. To suggest otherwise is to sell them short - and increases people’s chances that they will be poorer in retirement.

"People are living longer and expect a good retirement lifestyle. Our reforms will help 9 million more people save more or for the first time, boosting overall contributions by up to £10 billion a year.

“Most people will get good returns from saving on top of the reformed state pension, especially with the earnings link restored. Indeed, people with a good record of working or caring will be lifted above Pension Credit by the state pension alone.

“And individuals’ contributions matched pound for pound by the employer and tax relief, plus years of investment growth, provide a strong incentive to save."

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