EXCLUSIVE-Cost of pension reforms rockets

By Jennifer Hill, Personal Finance Correspondent

LONDON (Reuters) - Spending on government pension reforms -- designed to stave off a national pensions crisis -- has spiralled 300 percent, according to sources.

The government's new "personal accounts" regime will cost an estimated 2 billion pounds to set up, a four-fold increase on an initial budget of 500 million pounds, two sources close to the situation told Reuters.

The inflated bill could end up being a huge drain on the public purse, hitting even those taxpayers who opt out of the scheme.

Personal accounts, also known as the "National Pensions Saving Scheme", are set to come into force in 2012 to try to plug a 57 billion pound savings gap.

The scheme -- into which workers will be automatically enrolled unless they specifically opt out -- aims to encourage around 10 million Britons without a workplace pension to save for their retirement.

But the total cost of the Personal Accounts Delivery Authority (PADA) -- an apolitical body established to advise the government and oversee the development of the regime -- has mounted as management has gone back to the drawing board.

"This will be the world's greatest (largest) occupational pension fund and the biggest reform of pensions since pensions began," said one of the sources.

"(But) they've got dozens and dozens and dozens of expensive consultants working on nothing other than devising a plan and supporting the passage of a Bill, which is wrapped up in red tape and time-consuming government process.