The Government has been accused of a potential pensions mis-selling scandal, with millions of workers losing much of their savings in a new private scheme.

About ten million workers will be enrolled automatically in a new personal account pension, which is aimed at encouraging low and middle-income earners to save for their old age. Unless they choose to opt out, workers will pay 3 per cent of their salary into the new scheme. The details were published yesterday in a White Paper.

However, independent pensions experts have said that many people, including those who are self-employed, rent their homes and women who take career breaks to look after families, could lose much of the money they save.

The Pensions Policy Institute estimates that a woman aged 40 on very low income with no savings would get only 15p out of the scheme for each £1 she put in, losing 85 per cent of her savings.

David Laws, the Liberal Democrat pensions spokesman, estimated that two million people could lose money in the scheme. He said: “These new accounts run the risk of mass government pensions mis-selling. The huge number of means-tested benefits that accompany it will lead to many people losing up to 85p of every £1 they save.”

Philip Hammond, the Shadow Work and Pensions Secretary, told the House of Commons: “The last thing any of us wants is to be here in 30 years’ time facing the equivalent of a pensions mis-selling scandal with hundreds of thousands of people having saved and finding they are not benefiting from that saving.”

About half of pensioners are expected to be on means-tested benefits by 2050, and will gain little from the new pension scheme because much of the increase in income will be clawed back by reduced benefit payments.

Niki Cleal, the director of the Pensions Policy Institute, said that there was “a major issue” for at least 20 per cent of older people who received housing benefit, and for people who were self-employed and older people who did not have much additional savings. “For some people, the best thing they can do is opt out.”

James Purnell, the Pension Reform Minister, said that if people saved during their working lives “they will find themselves better off in retirement”. The scheme forecast “there will be only a small group of people — less than 10 per cent of pensioner households in 2050 — who may not see any benefit from saving”. Government officials insist that only those with very chequered work histories and very low incomes will not benefit, and that they will be given sufficient information to decide to opt out.

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