Pensions - new deal or age-old problem?

SHAUN LOWTHORPE First the good news - the government looks set to restore the link between the basic state pension and earnings from 2012.

SHAUN LOWTHORPE

First, the good news - the government is to restore the link between the basic state pension and earnings from 2012. That means that instead of the current 2.7pc annual price-based increase, the weekly state pension which today is worth £84.25 could rise by at least 3.8pc.

But the bad news is that many of us are going to have to work longer before we can get our hands on it.

Women, too, will be expected to work longer - with the retirement age for females rising to the same as men in the decade between 2010 and 2020, a change which is going to help fund the switch back to the earnings link. And today's teenagers are going to have to work until they are 69.


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Gordon Lishman, director-general of Age Concern England, said restoration of the link could be good news for future pensioners, but bad news for today's OAPs and those retiring before 2012.

He urged measures including an increase in the basic state pension to £114 a week and reducing means-testing ahead of 2012.

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He said: "In his report, Lord Turner noted that the real value of the basic state pension will have fallen to just £75 in real terms by 2010. This will be devalued further if the government does not act sooner than 2012."

He added: "The government must seize the once-in-a-generation opportunity to introduce radical pensions reform to help future generations avoid poverty in retirement."

Kate Jopling, a spokesman for Help the Aged, said: "We welcome news that the differences in policy are being worked on, but we are concerned that Turner's report may well be subject to short-term political expediency in order to secure an agreement."

She added: "It is time now for a decent, living pension paid at a level which finally removes the scar of pensioner poverty."

And the GMB union's general secretary Paul Kenny said: "The idea that the Labour movement will trade the introduction of the earnings link in six years' time in return for a higher state pension age for the next generation is simply ludicrous and unacceptable.

"We must not lose sight of the fact that the reason we have struggled for 25 years to get back the link between pensions and earnings is to improve the lot of pensioners. This plan promises to restore the link in six years' time in return for a higher state pension age. It does nothing for today's pensioners."

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