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Last Updated: Thursday, 24 June, 2004, 09:01 GMT 10:01 UK
State 'should act over pensions'
Will people have to be forced to save for retirement?
People may have to be forced to save for their retirement if they fail to start making better provisions for their future, a study has said.

The Economist Intelligence Unit (EIU) said the UK's retirement age will have to rise to cut the burden an ageing population will put on the state.

It added the government should step in if the public did not act.

The EIU also warned that the longer reforms are delayed, the tougher the changes ahead would be.

The group added that the move would mean employers would have to adopt more positive attitudes to older workers.

Increasing burden

It also suggested private healthcare provision must also be encouraged.

The UK Government, like most in Europe, is facing a shrinking working population caused by the combination of low birth rates and longer life expectancy.

Over the years, the UK's pension system has become ever more complex and confusing. Most people are baffled by it
Christine Farnish, NAPF
The study comes as the government is considering plans to give people a legal right to work beyond the age of 65.

The move is in response to a number of think-tank claims that the ageing population will cause a pensions crisis - with many recommending a higher retirement age.

However, the measures have triggered protest from unions who argue that a higher retirement age will mean one in four workers will die before they get a pension.

Liability worries

But the new Pensions Bill currently being debated in the House of Lords has been attacked by the venture capital industry.

The British Venture Capital Association (BVCA) - which represents private equity investors, has written to every member of the Lords urging it to drop or change plans which would see the new pensions regulator force companies or individuals to pay money into a pension scheme.

Such a move would saddle its members with unlimited liability for any pension fund deficits in companies they manage, the BVCA claimed.

Meanwhile, the National Association of Pensions Funds (NAPF) has set up a working group to examine practical ways of abolishing the current state retirement system.

"Over the years, the UK's pension system has become ever more complex and confusing. Most people are baffled by it," NAPF chief executive Christine Farnish said.

Flat rate

The complexity of the current system makes it difficult for people to make "meaningful plans" for retirement, she added.

Instead a new, simple, flat rate Citizen's Pension - payable to anyone who passes a minimum residency test - should be introduced.

Among those involved in the NAPF's working group are The National Consumer Council, Legal & General and PricewaterhouseCoopers.

The group will now examine how to combine the current two state pensions, what elements should make up the residency test and what level the new pension should be set at.

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