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Last Updated: Wednesday, 29 November 2006, 10:26 GMT
State pension age will rise to 68
Pensioner
The bill follows a three year debate on the future of pensions
A government bill outlining sweeping changes to the state pension system has been published.

Central to the bill are proposals to raise the state pension age to 68 by 2050 and to restore the link between earnings and the basic state pension.

Ministers, who say they hope to restore the link by 2012, have set out a timetable for a package of changes.

The package will also cut the number of years it takes to build a full basic pension for men and women to 30.

Today's bill is an important step towards ending the scandalous inequalities currently faced by women in retirement
John Hutton, Work and Pensions Secretary

Pensions Secretary John Hutton set out the government's proposals - already revealed earlier this month in the Queen's Speech - at a press conference in London.

Longer lives

The bill is the product of several years of public consultation and debate, and includes most of the main recommendations of Lord Turner's Pension Commission which reported last year.

The main proposals are:

  • Link increases in the basic state pension to earnings during the next Parliament
  • Raise the state pension age to 66 between 2024-2026, to 67 between 2034-2036, and to 68 between 2044-2046
  • Reduce the number of years it takes to build a full basic state pension from 44 years for men and 39 for women to 30 years for everyone
  • Create a new delivery authority to "bring on board the expertise needed to design a personal accounts system"

Mr Hutton said last month that the pension age would have to rise to ensure the pension system remained affordable as people live longer.

He also said major reform was needed to avoid shifting the tax burden onto younger generations.

Women should be significant beneficiaries of the changes.

Mr Hutton said that reducing the number of years it takes for people to qualify for a full state pension would "transform the pension situation for millions of women".

At present, about 30% of women pay enough national insurance contributions to qualify for a full state pension, mainly because they take time out of the work to look after children and relatives.

The government said it hoped that by 2025, up to nine out of 10 women would qualify for a full state pension.

As a result, the average women's state pension would rise from 77 a week to 130.

"Today's bill is an important step towards ending the scandalous inequalities currently faced by women in retirement," Mr Hutton said.

This bill is very good news for future pensioners but short-changes today's
Gordon Lishman, Age Concern

Shortcomings

There has been criticism that the reforms fail today's pensioners.

Opposition parties have accused the government of seeking to compel people to work longer without ensuring they receive a decent pension on their retirement.

Likewise, pressure groups, while welcoming the greater help for women and restoration of the earnings link, said that the bill had some shortcomings, particularly as there is a time-lag for many of the changes.

"This bill is very good news for future pensioners but short-changes today's," said Gordon Lishman, director general of Age Concern.

"If the state pension age must rise to fund a better state pension, there has to be a significant transformation in the workplace to enable older people to continue to work if they want or need to.

"Mandatory retirement ages must be scrapped and targeted programmes must be put in place to support those who need training and those who cannot work," Mr Lishman added.




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