Tuesday, December 15, 1998 Published at 15:59 GMT
Pensions review aimed at low earners
The value of the state pension is expected to fall in the future
The overhaul of the pension system will result in better provision in old age for all those on low and moderate incomes as well as carers, ministers say.
Unveiling the government's pension review, Social Security Secretary Alistair Darling said: "If we do nothing many pensioners would face poverty in retirement - a prospect we are not prepared to tolerate."
"For the first time ever, a lifetime's work won't lead to dependency on means-tested benefits in retirement."
Under the proposals set out for consultation, Mr Darling said the new incomes guarantee would equal about 20% of average earnings and apply to everyone.
'Where's the money coming from?'
Attacking the proposals, the Tory opposition asked the government where the money was coming from to provide better pensions.
Mr Duncan Smith also wanted to know how the increase in spending on pensions could possibly square with the government's declared aim of reducing the welfare bill as a whole.
He attacked the government for not making saving compulsory for those on incomes of £10,000 to £20,000 a year.
"Requiring people to save who can save is surely better than crossing your fingers and hoping that they will," he said.
End of SERPs
Mr Darling also announced the abolition of the State Earnings Related Pension (SERPs), which will be replaced by a new Second State Pension.
Ministers hope the proposed reforms will encourage the estimated five million people now earning between £9,000 and £20,000 a year who do not contribute any extra savings to their pension to do so.
Ministers say the reforms are the biggest pensions shake-up in a quarter of a century.
Other new proposals will see carers able to build up credit which can then be paid into the new State Second Pension.
Mr Darling said he was determined to set up a system that was both affordable and manageable, but there were no quick, blanket solutions as everyone's circumstances were different.
Mr Darling also spelt out what the government meant by the much talked about "stakeholder pension".
He said the government's long-term ambition was that everyone earning more than £9,000 a year should be in a secure, privately-funded pension, enabling people who do not have a second pension a chance to build up a nest egg for retirement.
Mr Darling admitted that Labour's plans would result in a £500m increase in government spending but he said everyone earning between £9,000 and £18,500 would receive improved pension rights.
He also announced a new annual pensions statement for every working showing how much private and state pension people were likely to receive.
Responding to the announcement, a Spokesman for Age Concern said: "This is great for future pensioners and also does a lot for carers.
"The problem for us is that it does not really address the needs of current pensioners. There are people still living on a pitiful level of basic state pension and they have not really said what they are going to do to address this."
UK Politics Contents
A-Z of Parliament