State pension age could rise

Britain’s workers could face an increased state pension, but they may have to work longer before they can claim it.

According to the Financial Times, Lord Turner’s Pensions Commission report, which is due at the end of the month, is expected to recommend an increase in the state pension – from the current £80 basic pension to close to the £109 means-tested minimum income guarantee – but also a rise in the pension age, from 65 to 67.

The commission, which was established to create a blueprint for pension reform, is also expected to recommend that pensions should rise in line with earnings, not just prices, and that the changes should be introduced after 2020, when women’s state pension age will be increased from 60 to 65.

Other recommendations are thought to include a national savings plan, dubbed the ‘Brit-saver’, in which people would be enrolled when they started their first job, although they would have the right to opt out, for a limited time, if they had other commitments or debts.

The scheme is modelled on the ‘Kiwisaver’ plan, which is being introduced in New Zealand.

The commission is also thought to be examining other ways to make the state pension more generous, including scrapping the existing second state pension and associated rebates, by introducing a flat rate system.

Anyone aged under 50 would be affected by the proposals, which have been drawn up amid fears that many British people are failing to save enough for their retirement.

Lord Turner’s interim report last year warned that British people would risk living in poverty in old age, unless they paid higher, saved more or worked longer.

A spokesperson for the Pensions Commission dismissed the Financial Times story as “speculation.”

However, Shadow Work and Pensions Secretary Sir Malcolm Rifkind accused the government of creating “huge inconsistency and inequality”, because of the recent deal with trade unions, allowing public sector workers to retire at 60. He said: "He (the Prime Minister) needs to find a coherent approach to deal with a crisis that is largely of the government's own making."

"The Labour government has contributed to the pensions crisis in this country by attacking the savings culture. The savings ratio has nearly halved since Labour came to power, from 9.6% in 1997 to 5.0% in 2005.”

TUC General Secretary Brendan Barber said that the union would judge the Commission report on how well it matched their broad principles and objectives. But he questioned whether ministers had the political will to make the radical changes necessary to solve the pensions crisis.

(KMcA/SP)