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30/11/2005

Mixed reaction to pensions report

Today's Pensions Commission report has been hailed by the government and opposition leaders but fiercely criticised by both businesses and trade unions.

The review proposed a gradual rise in the state pension age to 68, as well as the introduction of a national pension saving scheme and a rise in payments linked to earnings, rather than prices.

The report was welcomed by Work and Pensions Secretary John Hutton, who described it as “an important milestone towards a lasting pensions settlement”. He said: “The government welcomes the broad framework of the Pensions Commission’s proposals and options and believes they are the right basis for the debate to come.”

Chancellor Gordon Brown, however, has already reportedly expressed opposition to the plans, suggesting that an earnings-linked state pension would be unaffordable.

Conservative Shadow Work and Pensions Secretary Sir Malcolm Rifkind urged the government to give the proposals “serious consideration”. He said: "We should remember that it is this government which has been responsible for the pension crisis in this country by attacking the savings culture with a £5bn raid on pension funds. It seems there is now an emerging consensus on pension reform, but there is still one figure outside the consensus - Gordon Brown."

Sir Malcolm also said that the government had to have a “fair and consistent” approach to pensions, referring to the recent deal with trade unions, allowing existing civil service employees to retire at 60. He said that this was “simply unfair” to private sector workers.

David Frost, Director General of the British Chambers of Commerce, said he was “very disappointed” to see that employers would be expected to contribute to the national pension saving scheme. He said: “Small firms would be particularly badly hit and businesses have told us that they would have no option but to lay-off staff, freeze salaries and much-needed investment. This is compulsion by the back door and would be bad for businesses, their employers and the UK economy as a whole.”

However, Mr Frost welcomed the proposal to increase the state pension age, describing it as “a crucial element of paying for a higher basic state pension and a wholly logical response to increasing longevity”.

TUC regional secretary, Kevin Rowan, said that the Commission had delivered some “hard messages” on the state of Britain’s pensions systems.

He said: “While unions remain opposed to any increase the state pension age, as manual workers and the lowest paid would be hardest hit, the report nevertheless contains some welcome proposals.

“In particular, linking the basic state pension age to earnings and introducing compulsory employer contributions are positive recommendations.

“In addition, we welcome the new measures for ending the raw deal that women in retirement have long faced.”

(KMcA/GB)

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