BRITAIN: Heading for Poverty in Old Age?

LONDON (The Guardian), November 17, 2005: Britain's workers could receive a more generous state pension in return for working longer, it was reported today. hen Adair Turner's Pensions Commission publishes its report at the end of this month it will suggest that the age at which people will be eligible to claim the state pension should rise over time from 65 to 67. The commission was set up to review pensions amid fears that many Britons are heading for poverty in old age. Other expected recommendations include the "Brit-saver", a new national savings plan in which people will automatically be enrolled when they start a job, with the right, for a limited period, to opt out, according to the report. The state pension should also be closer to the £109-a-week means-tested minimum income guarantee rather than an £80-a-week basic state pension, the commission is expected to say. It should rise in line with earnings, not just prices, with the changes phased in after 2020 when the women's state pension age is aligned with men's at 65, the FT report said. After that, the age should rise in accordance with the rate at which people are living longer, it added. The commission is also thought to be looking at ways of making the state pension more generous, either through scrapping the existing second state pension and its associated rebates, or by keeping it but making it flat rate. Adair Turner is not due to deliver his report on pensions until November 30 and a spokeswoman for the Pensions Commission this morning dismissed the FT's story as "speculation". However, in his interim report, published last October, Mr Turner said it was likely that the solution to the pensions crisis would involve a combination of higher taxes, more saving and a higher retirement age. Increasing the state retirement age would affect anyone aged under 50 and mean that those who did want to retire at 65 would need to make extra pension provisions. According to pension provider Legal & General, saving an extra £6,000 between now and retirement would cover the state pension lost in the two years between 65 and 67. The TUC said it would be interested to see the public reaction to the news that they needed to work longer or save more. "If today's report is accurate it will be interesting to gauge the appetite of the public, particular the low paid with lower life expectancy, for being made to work an extra two years," a spokesman said. The Conservatives said the government's recent deal allowing public sector workers to retain a retirement age of 60 would mean any plans to introduce a higher state pension age would create "huge inconsistency and inequality". "If the report does recommend 67 as a retirement age and the government does go for it then it's going to be very hard for them to sell it to people when they see the massive inequality," a spokesman said. He said it was "too early" for the Conservatives to say what they planned to do about the state retirement age, and whether they were for or against any changes. "We believe the government should be looking at incentives for people to save and at encouraging people to do so," he added. Downing Street would not discuss today's reports. The prime minister's official spokesman said: "Let's wait for the report. Nobody should rule anything in or out until we have received the final report." And the Association of British Insurers (ABI), which represents many pension providers, said it would also be reserving comment until the publication of the final report. By Hilary Osborne and agencies The Guardian