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NEWS

Lord Turner defends pension plans

Proposals to increase the basic state pension in line with earnings raise the state pension age to 68 and introduce a compulsory national savings scheme has been defended by Lord Turner.  Releasing the Pensions Commission's final report into the future of the UK's state pension regime, its head Lord Turner said the proposed reforms were affordable.  He hit out the current system saying it was not "fit for purpose" adding that a purely voluntary scheme would not work effectively. Turner proposes that rather than linking pensions to inflation, they should rise in line with earnings.  His commission also claims the basic state pension age should gradually increase from 65 to 68 by 2050 with the whole system backed up by a National Pension Savings Scheme (NPSS), into which many employees would be automatically enrolled into and to which employers would be compelled to contribute.  Turner said there was "almost universal support" for automatic enrolment in the NPSS as well as "considerable support" for employer compulsion.  He acknowledged however the "legitimate concerns" raised by business organisations about the costs of obligatory contributions for small firms.  Speaking during a press briefing this morning, Turner said it was now up to the government to implement the proposals. 

"The government now faces the difficult challenge of deciding how far and how fast it can move towards the reform of the state pension system we proposed, in light of other claims on public expenditure," he said.

It has been claimed that the findings will create tensions between Prime Minister Tony Blair and Chancellor Gordon Brown. Blair is said to want to implement the proposals whereas Brown is opposed because he believes they would be too expensive.  The government is due to formally respond to the Commission's proposals later this spring.  Business groups meanwhile warned the government that forcing businesses to contribute to employees pensions may prove seriously damaging.  British Chambers of Commerce director general David Frost said it could be the "tipping point" for some firms. 

"Businesses are already struggling to cope with an increasing raft of complex employment legislation. They are finding it impossible to recruit skilled staff - often taking on migrant workers to fill gaps," he said. 

"They are also trying to get their goods and staff around the country in the face of a failing transport system. And meanwhile energy costs rise relentlessly. Forcing firms to pay into a pension scheme is just a step too far."

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