Pensions blueprint to be unveiled

Turner report

Proposals to lift the value of the basic state pension and raise the state pension age from 65 to 67 are expected to be unveiled.

The reforms are set to be part of the government-appointed Pensions Commission's recommendations.

A new national savings scheme may also be proposed, with workers contributing 4% of their earnings.

The expected proposals have already caused a political row, with Gordon Brown said to oppose some of them.

The Chancellor is believed to be opposed to the possibility that Lord Turner's commission will call for the basic state pension to be increased each year in line with earnings - rather than with inflation as at present.

Mr Brown is said to consider the change to be unaffordable.

Overnight, the debate moved from what the report would contain to whether there was the political will to follow its recommendations through What the Pensions Commission is likely to propose

Earlier this month, Pensions Minister John Hutton said any changes must meet five tests - to promote "personal responsibility" and be fair, affordable, simple and sustainable.

Tough options

Under Lord Adair Turner, the commission has spent three years looking at ways to revamp the UK's pension system.

The interim report was published in October last year and ran to more than 300 pages.

Something would have to give [if a national savings scheme is introduced] and significantly, it could be jobs David Frost, director general of the British Chambers of Commerce

After analysing issues such as the fact that people are living longer, the lack of retirement saving by individuals and the rising cost of pensions to the state, the report said that society and individuals had to choose between a mix of four options:

• pensioners becoming poorer relative to the rest of society
• taxes rising to pay for higher state pensions
• savings rising
• average retirement ages rising

Lord Turner said that as greater pensioner poverty was undesirable, some combination of the three other solutions would be needed.

It is his preferred solutions that will now be published.

HAVE YOUR SAY Perhaps if pensions were safe from greedy politicians it would encourage more of us to save Kyle R, Cardiff Send your comments

He is also expected to outline specific proposals to help female pensioners, who are generally worse off than men because due to their taking time off work to bring up children, they have contributed less to their pension provision.

Business fears

A central proponent of Lord Turner's solution is expected to be the creation of a new "Britsaver" pension scheme that all workers would be automatically enrolled in, unless they chose to opt out - so-called soft compulsion.

Providing this [the proposed Britsaver scheme] is phased in, and providing the rate at which it is set takes account of British competitiveness, I think it would be affordable Association of British Insurers head Stephen Haddrill

He is expected to suggest that under the scheme individuals contribute 4% of their earnings, their company an additional 3% and the government 1%.

Business is divided on whether such a national savings scheme, modelled on one currently being developed in New Zealand, would be affordable for them.

"My concern is just that businesses can't afford it," David Frost, director general of the British Chambers of Commerce, told the BBC's Today programme.

"Simply to levy an extra 3% as a compulsory pension contribution at this time would be very harmful.

"Something would have to give and significantly - it could be jobs.

"One in five companies that spoke to us said they would have no option but to make redundancies if they were forced to make a contribution."

UK competitiveness

Yet the Engineering Employers Federation has backed the Britsaver plan, describing it as "not overly burdensome".

The Association of British Insurers also supports greater employer contributions.

"There is a great British tradition of saving through the workplace, but there is a great hole at the moment in British saving and that hole needs to be filled," said its director general Stephen Haddrill.

"We think it has to be filled through a combination of contributions from employees and employers.

"Providing this is phased in, and providing the rate at which it is set takes account of British competitiveness, I think it would be affordable."

While Lord Turner is generally expected to suggest the state pension age is raised to 67, some, such as the Guardian newspaper, have suggested that he could go as far as saying it should go up to 69.