Britons told to work, save more

LONDON - Britons will be urged to work longer and save harder to pay for their retirement by a long-awaited report on reforms to company and state pensions due to be published overnight.

Set up three years ago, the Pensions Commission was asked to look at problems facing Britain's pension system, creaking under the pressure of an ageing workforce and facing a 57 billion ($141.45 billion) shortfall in retirement savings.

The commission, chaired by Adair Turner, was expected to advocate policies to encourage citizens to work longer, push companies to fund retirement pots and increase state pensions.

Proposals are expected to include raising the age at which people take a state pension, possibly up to 67 for men from the current qualifying age of 65.

However, the Government will be asked to play its part too, raising state pensions in line with earnings, rather than prices that tend not to go up as fast, while reducing the need for retirees to rely on means-tested benefits.

Prime Minister Tony Blair said yesterday that he supported Turner's report, which he has seen but also said any reforms must be affordable - a Government position which could leave room to reject some of Turner's recommendations.

Chancellor of the Exchequer Gordon Brown is reported to fear that a higher state pension, linked to average earnings, would leave the Government with a huge bill in years to come.

His central approach has been to use means-testing to target money at the poorest pensioners.

The report will trigger a consultation process which will lead to detailed proposals published by the Government in the first half of 2006.

Critics say the Government has already skewed the system by agreeing that millions of public sector workers already in service can still retire at 60 - raising the prospect of a double standard for the private sector.

The commission was also asked to consider whether employees and companies should be compelled to put money into work-based pensions, as happens in countries such as Australia.

Analysts have said they expect the report to embrace the idea of "soft compulsion", which means employers would be obliged to contribute to workers' pensions if employees did so.

Cradle to grave

Review

The commission was set up in December 2002. Chairman Adair Turner is ex-director general of the Confederation of British Industry.

Reform ideas

Will likely include raising the level of the state pension in line with earnings rather than inflation; make enrolment of staff in company schemes automatic unless employees refuse to join; suggest raising the pension age and reduce benefit means-testing.

Under pressure

Britain's private and state retirement systems are creaking because of a rising number of retirees compared to workers.

New minister

Secretary for Work and Pensions John Hutton takes over from David Blunkett. Hutton says primary responsibility for security in old age should lie with individuals rather than the state.

- REUTERS