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Last Updated: Wednesday, 15 November 2006, 11:47 GMT
Bill to raise state pension age
Money
More people should qualify for a full state pension under the reforms
A bill which will overhaul the UK state pension system has been included in the Queen's Speech.

The state pension age will rise from 65 to 68 by 2046, if the bill passes.

In return for a later pension age, the link between the state pension and average earnings is to be restored during the next parliament.

In addition, it should take fewer years of National Insurance Contributions to earn a full state pension, a move aimed at helping women.

The government said it wanted an: "Enduring pension settlement built on a consensus" and a "state system more generous and more widely available and provide a solid foundation on which to save for retirement."

Reforms recommended

The Pension Bill is based on three-year study into the UK pensions crisis by the now defunct government Pensions Commission.

The commission, under Lord Turner, recommended several reforms, with the following finding their way into the Pensions Bill:

  • Gradually increase the state pension age for men and women from 65 to 68 by 2046
  • Establish a system of Personal Accounts, which would see employers, employees and the government all contributing. The aim is to boost savings levels
  • Restore the state pension earnings link. This would see state pension rise in line with average earnings rather than inflation
  • Simplify the second state pension system and end contracting out into personal pensions schemes

Boost for women

Women may have most to cheer from the Pensions Bill.

At present, many of them miss out on full state pension because they fall short of the requirement to make 39 years-worth of National Insurance Contributions.

Often women take time out of the workforce to look after children or relatives.

State pension age rise
State pension age will rise from 65 to 66 between 2024 and 2026
Rises from 66 to 67 between 2034 and 2036
Rises from 67 to 68 between 2044 and 2046

The government wants to cut the number of years it takes to qualify for a full state pension to 30.

It estimates that taking this step will mean that by 2025 nine out of 10 women will qualify for a full state pension.

Overall the government said it wants the Pension Bill to improve: "Fairness between generation and helping secure the long term financial stability and sustainability of the pension system"

Decisions pending

The Pensions Bill will not name a definitive date for the restoration of the state pension earnings link.

Instead the government has committed to restoring the link during the life of the next parliament.

But restoring the earnings link would effectively double the value of the state pension by 2050, the government added.

As for the system of Personal Accounts, the full details - such as who will run it, the government or insurers - are yet to be settled. But the bill if passed would see the setting up of a "delivery authority" for the Personal Accounts system.

The BBC has been told that the government intends to publish details of its plans for Personal Accounts in early December.




QUEEN'S SPEECH 2006

KEY COVERAGE

ISSUE-BY-ISSUE COVERAGE
 

ANALYSIS AND FEATURES
Boxing gloves Gloves are off
Tony Blair denies using politics of fear... then warns Cameron he faces a thumping

BACKGROUND
Pomp and pageantry

HAVE YOUR SAY

WATCH/LISTEN


SEE ALSO
Workplace pensions 'could be cut'
10 Nov 06 |  Business

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