A fraught old age - the Turner Report and pension worries

The preliminary findings of the Turner report - a commission on pensions expected to be highly influential on future government policy - have recieved a mixed reaction after they were leaked ahead of their official release.

Controversial measures to increase the statutory retirement age to 67 for state pensions have angered unions, though parallel suggestions that companies should be forced to contribute more to the pensions pot have been well received.

The commission has also suggested that the later retirement date should be offset by a higher pensions rate - up from a basic rate of £80 to £109.

Statistics released later in the week have pointed out that approximately 3.4% of the male population will have reached 65 will die before they reach 67, significantly reducing the likely payout by effectively consigning them to 'work til you drop'.

The commission has said that the increase in the state pension is effectively a reallocation of money, largely trading a larger payout for the later start. However, the likely drop in the number of claimants through death makes it likely that extra money will be recouped over time.

Legal and General have said that in order for people to make up the two year difference and retire at 65, they would have to put around £6,000 more into the pot.

Alongside the proposals for the basic state pension it was revealed that a second state pension would be suggested, with an opt-out available, which would be imposed automatically on individuals and companies.

Called the 'Britsaver' account, payments of around 6% of income would seem likely. The measure has been campaigned for by several unions over the past few years as an alternative to major changes to the existing scheme.

The proposals will also include the possibility of higher taxes to help fund both the Pensions Protection Fund and the government's own attempts to cover its pensions shortfall.

The government has come under fire in both aspects of its own policymaking in the last two weeks. The Pensions protection fund has been widely ridiculed as it has been unable to draw in enough funding to fulfil its purpose of providing a pensions safety net.

The fund has not taken in enough money from big business and is running significantly behind current needed funding levels.

A new report by the Institute of Economic Affairs has also criticised the government's figures on the state pensions hole.

New figures compiled by the IEA, which uses a lower likely interest rate than the official government view over the next few years, have estimated a pensions gap of £817bn.

The figure is nearly twice the previous estimate, and represents approximately 69% of the total GDP for the UK.

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Nov 23 2005 13:29


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