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Last Updated: Thursday, 12 May, 2005, 20:11 GMT 21:11 UK
Pension reform options kept open
David Blunkett
Mr Blunkett is ruling nothing out
David Blunkett called for people to "take responsibility and key decisions for themselves" in his first major speech as Work and Pensions Secretary.

He described his approach as "something for something", not a "safety net".

Mr Blunkett said he would seek a consensus among MPs, the public and industry on pensions.

But he steered clear of hard policy details in his speech to the National Association of Pension Funds' (NAPF) annual conference late on Thursday.

"Reforming the welfare state is not just about tinkering with the nuts and bolts of managing pension payments," he said.

"It is about transforming its nature from a safety net to a trampoline or an escalator. Providing help and support as it has always done but also enabling people to take responsibility for themselves."

Last year, a pensions report estimated that more than 12 million people are not saving enough for their retirement.

Open mind

The interim report from the Pensions Commission - published last October - said a mixture of higher taxes, more saving and a higher average retirement age was needed to solve the UK's pension crisis.

Compulsion is not the answer, it would be viewed by both employers and employees alike as yet another stealth tax
Sir Digby Jones, CBI director general

The Commission is due to deliver its final report later this year.

Mr Blunkett told the BBC that he was keeping an open mind on the various options for reform.

"I've ruled nothing out," he said. "I haven't ruled out the issue of some means of ensuring people do save."

However, the director general of the CBI employers' organisation, Sir Digby Jones, urged the government to avoid making contributions to pensions compulsory.

"Compulsion is not the answer, it would be viewed by both employers and employees alike as yet another stealth tax."

Mr Blunkett indicated that people would have to start taking greater responsibility for funding their retirement.

"We have got to look at the point when people start saving for themselves," he said.

"The issue is not tax versus saving, (or) the question of how long people work. It's what people are prepared to do for themselves, and how we as a government support, enable and facilitate them doing it for themselves."

Finding incentives

Commuters
Many people may have to work longer for a decent pension

Malcolm Rifkind, the shadow work and pensions secretary, said the government needed to make saving more attractive.

"We have to find ways of creating an incentive for people to save and the government must set an example by creating these incentives," Mr Rifkind said.

Liberal Democrats' pensions spokesman Steve Webb said Mr Blunkett's first priority should be to sort out the state system.

"We need a simple state system that will make private pensions work better," he said.

Sir Digby Jones of the CBI said the government should avoid seeking a "one-size-fits-all" approach.

"Although a simplistic panacea may have appeal, a more sophisticated mixed solution will have longevity and provide the long-term stability we all seek," Sir Digby said.

'Incomprehensible'

The NAPF has proposed scrapping the second state pension in favour of a universal pension which would rise in line with average earnings.

"For most people (the state pension) is really incomprehensible," the incoming chairman of the NAPF, Robin Ellison, told the BBC.

"The general feeling is that we should be paying a flat rate pension to pretty well everybody without a means test, possibly at a slightly later age but at a higher level."

However, the chairman of the Pensions Commission, Adair Turner, told the Financial Times newspaper on Thursday that he was "very wary" of a flat-rate, universal pension.

He told the paper that, as well as proving a basic pension, the government needed to encourage people to make more provision for their future.

The Commission is still undecided whether a revived voluntary system or compulsion is the best to achieve this, Mr Turner told the FT.




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