LONDON: Prime minister Tony Blair has indicated that his government may provide a more generous basic state pension in order to push for raising the pension age from 65 to 67. This is, however, contrary to the views held by chancellor Gordon Brown, who has reportedly rejected plans for a state pension linked to average earnings and a rise in the state pension age to 67.
The Pension Commission, headed by Lord Adair Turner, which has been studying the pension issue for the last three years, is set to submit its report Wednesday.
Blair said Saturday the "basic construct" of the Pensions Commission would be welcomed by his government. According to reports, Lord Turner is expected to recommend an increase in the 82 pounds-a-week state pension in line with earnings instead of prices, which rise more slowly, and that people should qualify for it at the age of 67 after 2020. Brown is said to be opposed to the increase as he feels the estimated 12 billion-pound annual cost will increase taxes.
Blair said in a television interview that he does not subscribe to the view that the Turner commission had been a waste of time as there are allegations that the treasury had launched a pre-emptive strike against his proposals.
Referring to his differences with Brown, Blair said a solution to the problems over pensions had to be affordable. Brown is just saying that decisions need to be taken according to the financial resources.
He categorically said the commission's proposals will be given a broad welcome by the government.
Brown has written a letter to Lord Turner, expressing his views. The contents of the letter were leaked to the press. The conservatives charged Brown of attempting to sabotage the report even before its publication, while the unions said the government appeared to be planning to use the report as an excuse to go back on a deal with public sector workers, which allows them to retire at 60. Indeed, business leaders have urged the government to relook at the public sector deal, which they described as creating a two-tier pension system in the country with a higher retirement age for private sector workers.
The treasury has, however, said there is no intention to renege on the deal. A spokesperson said nobody is talking about ripping it up or blocking it. However, if there is a recommendation in Lord Turner's report to change the retirement age, then that will form part of a national debate, he added.
According to broad indications, Lord Turner would recommend a scheme for all workers to be automatically part of a pension scheme with annual contributions constituting 8 per cent of their salary -- 4 per cent from the employee, 3 per cent from the employer and 1 per cent from the state. Lord Turner contends that the recommendations would add little to public expenditure over the next 15 years. After that these may rise by 1.2-1.8 per cent of gross domestic product.
According to the pension package for the public sector, approved by the cabinet earlier this year and coming into force next June, existing workers can retire at 60, but new entrants will have to work until 65 years of age to get a full index-linked pension. The Confederation of British Industry says the cost of the scheme and the delay in public sector workers moving to the 65 years of age regime will be huge. It will also be unfair because private sector workers are forced to work till 65 or even 67 to become eligible for pension. The government contests this argument saying the costs of the deal are exaggerated and it is not true that millions of workers will retire at 60. Most people in the public service opt to work until they are 62 or 63, even when they become entitled to the index-linked pension at 60.
Posted
on : Mon, 28 Nov 2005 07:05 GMT | Pensions News
By : Pippa Fielding
|
