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Last Updated: Saturday, 10 January, 2004, 09:34 GMT
Lords urge radical pensions plan
Salary slip
Pensions 'should not depend on National Insurance contributions'
Radical changes to pensions have been demanded by a House of Lords committee.

The basic state pension should be replaced with a non-means tested alternative, the all-party Economic Affairs Committee said in its report.

It said the pension should be dependent upon years of UK residence, rather than National Insurance contributions.

The peers also said age discrimination has to end, with employers no longer able to enforce retirement, so people can work and save for longer.

Retirement ages

The lords said putting less emphasis on means-tested benefits and more on the basic state pension would be simpler.

They also said it would encourage people to save more for their pension, without fear of losing entitlements.

It would also be fairer to people - particularly women - who had not paid in enough National Insurance contributions over the years.

However, BBC economics editor Evan Davies said the lords' proposed system, although simpler and fairer than the current one, "would, it has to be said, also be more expensive".

On retirement ages, the lords urged ministers not to permit employers to continue imposing a "normal" limit.

An enormous number of people are perfectly capable of working on, they want to do it, and they should be judged on their individual merits
Lord Peston
They argued that with an ageing population it was economically inefficient to prevent older people from working, as well as ageist.

The Labour chairman of the committee Lord Peston told BBC Radio 4's Today programme: "An enormous number of people are perfectly capable of working on, they want to do it, and they should be judged on their individual merits."

He called for people to be allowed to stay on if they wished, as long their employer was happy for them to do so.

"We're not arguing that people should have the right to stay on whether the employer wants them or not... the employer has to have the task of judging who should stay on."

We do want to have some sort of retirement with dignity, we don't want to make everything a matter of competence
Sue Andersen, CBI
But Sue Andersen, director of human resources policy at the UK's main business group the CBI, warned that judging employees on their merits could end up making the situation worse.

"We do want to have some sort of retirement with dignity, we don't want to make everything a matter of competence," she told Today.

"That may well lead to early departure from the workplace because an employer may be tempted to say... 'you are no longer up to the job and you have to go now'.




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