The Personal Accounts Delivery Authority was set up by the UK government to encourage pension saving for the 10m lower paid workers who now save little or nothing for their pensions. In line with the two Pensions Commission Reports and the 2006 White Paper, Pada, will, from 2012, open personal pension accounts holding equities and bonds. Employees will contribute at least 4 per cent of earnings, with a 1 per cent tax break and employers at least 3 per cent, up to £3,600 a year. Employee enrolment will be automatic, with a right to “opt out”.

Pada has just finished a public consultation on the appropriate asset allocation for personal accounts and the hefty 170 page discussion paper considers a range of investment issues. But asset allocation is effectively pre-determined at an average of 60 per cent equities for each individual, since any lower risk allocation will fail to deliver the projected eventual pension assumed by the government.