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Last Updated: Saturday, 8 April 2006, 13:21 GMT 14:21 UK
'Shift in state pension' needed
By Paul Lewis
BBC Radio 4's Money Box

The level of means-testing among pensioners must reduce if plans to encourage more people to pay into a pension at work are to succeed, the government has been told.

Lord Turner
Paul Lewis spoke to Lord Turner after he submitted the final report

"I don't think the private pension reforms we have proposed can go ahead without some changes to the state system," Pensions Commission Chairman Lord Turner told BBC Radio 4's Money Box following publication of its final report.

"If we are going to automatically enrol people in private pensions there is a real problem if there is a spread of means-testing on the state side."

Lord Turner set a target for reducing it.

"At the moment about 40% [of over 60s] are getting Pension Credit. If there is no change that will go up from 40% to 75% [by 2050].

What is clear is [means-testing] has got to go down not up
Lord Turner
"Under the proposals we put forward we achieve a gradual fall to about 30%. That would be a useful measure.

"If [the government proposes] a package to bring it down to 35% not 30%, you would have to think if that is as good as one is going to get. What is clear is, it has got to go down not up."

He told the programme that he expected government plans to include most of the measures he has proposed when they are published in a couple of months.

That would include a national pension savings scheme which employees are automatically enrolled in (although they have the option to opt out) and to which their employer has to contribute at least 3% of their pay.

Women's pensions

Lord Turner also expects changes in the state pension.

"I think there will be a commitment that the state pension age goes up, to improve the treatment of people with interrupted careers, above all that means women, to make sure they are more likely to accrue a full state pension.

"And I think there will be a more favourable future indexation of pensions. The big issue is how much more favourable and is that enough to make enough progress against the spread of means-testing."

What we have to do is push the politicians to go far enough down the path of state pension reform
Lord Turner
Lord Turner wants the state pension to rise each year in line with earnings rather than prices as it does now.

That would almost double the annual increase from around 2.5% to closer to 4.5%, so pensioners share in rising living standards.

Chancellor Gordon Brown has said he has no problem with that in principle, but any change must be affordable and not put up taxes.

Lord Turner told the programme that the job now was to make politicians listen: "What we have to do is push the politicians to go far enough down the path of state pension reform.

"There needs to be a significant shift in state pension policy away from the path that we are on."

BBC Radio 4's Money Box was broadcast on Saturday 8 April and was repeated on Sunday 9 April at 2102 BST.



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Lord Adair Turner speaks to BBC Radio 4's Money Box



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SEE ALSO:
Pension plans '90 to 95% agreed'
04 Apr 06 |  UK Politics
Pension shake-up plans defended
04 Apr 06 |  Business


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