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Last Updated: Monday, 1 May 2006, 07:22 GMT 08:22 UK
Brown offers pension compromise
A woman protesting over pensions
The government is hoping to introduce wider reform of pensions
People over 75 could be given state pensions linked to the level of earnings, as part of reforms of the system, the BBC has learned.

The move is among others being considered under compromise plans prepared for Chancellor Gordon Brown by his Treasury team.

Mr Brown has always had reservations about linking all state pensions to earnings rather than inflation.

But the latest step is an affordable step towards earnings-linked pensions.

It is seen as a significant compromise by the chancellor, who has laid the plan on the table during top level discussions about how to reform Britain's pension system.

'Concession'

According to BBC political correspondent John Pienaar it would be an "eye-catching concession", which is in line with the precedent of giving the over 75s free television licences.

The final shape of the government's plan is yet to be resolved. A Treasury source told the BBC other options may yet be judged affordable too.

A Treasury spokesman told the BBC: "While the Treasury has never opposed a link to earnings in principle the structure and affordability issue has to be considered. This has been the case and remains the case."

The Liberal Democrat spokesman on work and pensions, David Laws, told BBC Radio Five Live he did not think people would accept the compromise.

We already have the most complex system in the world
Ros Altmann, pensions expert

"The government knows it's going to be a difficult sell to ask people to retire later, to wait later until they get their full basic state pension, and I don't think people will be bought off by the idea of waiting until the age of 75," he said.

But Ros Altmann, a pensions expert who has worked as a consultant to the Treasury, said it would be a welcome move - although it would make the system more complicated.

She said: "We already have the most complex system in the world."

Dr Altmann told BBC Radio 4's Today programme: "I just do not understand why we would not want to have an earnings link for all pensioners.

"It just does not make sense to me that a state basic underpin to give people some kind of... social welfare basic level of dignity in retirement should not be linked to earnings."


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