Pensions - Is government cooking up a mis-selling disaster?
http://www.bbc.co.uk/news/business-13573510

I fully expect some frank opinions on this...

I expect that it will be a disaster. The fundemental problem with pensions over the last decade is that returns have been nowhere near the numbers required to enable someone to retire with the payments that they make. The costs will be huge and without a cap on fees then I can see this blowing up in the governments face a few years down the line. Banks and insurance companies love this because it guaranteeshuge fees for them. Personally if interest rates were not so low I would suggest a ISA pension. Get tax free status and no costs, plus you can see exactly how much you have in the pot every year without risk from falling stock markets.

If you can afford to it's a good idea to have a spread of investments for retirement - pension, savings and property for example. The key part of that however is 'if you can afford to', which a large majority cannot if they want to actually have a decent existence for the bulk of their lives. Doing so however, makes you liable to have to pay for some or all of your care costs if you become unable to look after yourself.
An ISA pension would have to have an interest rate that was at least equal to or slightly higher than inflation (and I'd personally go for RPI inflation not CPI). It was also need to be ring-fenced so that the government or financial institutions could put the capital at risk by dodgy investments or someone going bust. Such products are indeed available, but again, are normally only feasible if you have a fairly large lump sum to invest to start with (£10k + typically).

I must confess, another aspect of the mandatory pensions situation that concerns me is that employers will be tempted, soon or later, to only offer the statutory minimum pension rather than any better current schemes they offer. Why pay in 5, 7, 10% of your employes salary when you can get away with 3%?

Another issue with pensions is that we've seen repeated examples of governments seeing pensions as some sort of emergency fund that they (or business) can raid periodically either through changes to the tax system or making it favourable for companies to have pension payment holidays.

Yes you are right a spread of investments is best but as you say the vast majority cannot afford to do that. They need safe but decent returns, which deposit savings simply do not do at the moment with bank of England policy to wipe out savings to encourage speculation instead. Yes aim for RPI rather than CPI though I suspect that CPI could turn out to be hogher in the years ahead as property prices slump. Though yes ISA's do need to be ring fenced from banks losses.

As for pensions I agree there should be a much higher minimum contribution. With current annuity rates people will need to put aside nearly 30% of their annual salary to be able to retire on anything like a two thirds final salary which is a long way from what is actually being done. So the majority of people will find retirement very tough. Companies should be foprced to contribute 15% of salary so there is no incentive to cut final salary schemes.

As for care costs most will simply not have the money to afford it.

In fairness, that is your default position on all subjects and those words should be printed onto a t-shirt in your honour.

Risk will be spread less evenly than it could be, which will ensure that there are winners and losers, that's imperfect. But a disaster scenario is one where people lose their entire investment, which is not the case here. Some people will get a disappointing return on their investment, but many (the large majority?) of those people are the ones who would previously have invested nothing at all.

The scheme suffers from the usual Tory/Republican assumption that free markets contain wisdom as an emergent property even though such is predicated on a level of sophistication that consumer's can't reasonably be expected to develop and retailers can easily be expected to confound.

There should be good regulation to ensure that products are presented with the right information about risk and cost for consumers to get the absolute best deal, and on that score we can assume that there will be a giant fail. But this is a secondary matter; the far more important regulatory requirement is that nobody should be sold a truly [LIFTED] product that will collapse and leave them penniless.

I think that the idea is good, but I suspect that because there are no caps on fees that it will just end up being a great big money earner for the financial sector. The fees as a proportion of the funds will be higher, meaning that they will be very poor performers for those that they provide for. If there was a cap on fees it would end one of my issues about the scheme. The other is the size of the contributions. They are far too small, so I suspect that thsi will be a race to the bottom with workers pensions being the price paid.

Pensions used to be well run and well funded but endless government (both parties) raiding of pension funds, and legislation that boosted government coffers at the expense of pension funds. Add in lousy investment returns for the last decade and many people have retired with a substantially lower pension than they expected. Anyone who had a private pension and has retired recently has probably had a drop in their income of 30% to 40% as a result of the financial crisis. It will have led to significant losses for final salary schemes.

So what about the majority of people who have not had a real pay increase since 2003. These schemes are just a way of pretending that the government are actually doing something about pensions. If the government were so confident that they were good, transfer all MP's and top civil servants to them. I suspect that they will not. Long term you should expect to be living on means tested benefits come retirement.