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Last Updated: Thursday, 23 November 2006, 17:39 GMT
Hutton says pension age must rise
Work and Pensions Secretary John Hutton
John Hutton said the changes were 'fair to everyone'
The state pension age has to be raised to 68 to avoid shifting the tax burden onto younger people, Work and Pensions Secretary John Hutton has warned.

If the change, to be phased in over 40 years, does not happen, there will have to be a 4p rise in income tax, he said.

The proposed rise from 65 as the age at which people could get the state pension is expected to be included in a bill of reforms published next week.

The bill will also propose reinstating a link between pensions and earnings.

Earnings-related

The pensions package, unveiled in last week's Queen's Speech, will also cut the number of years it takes to build a full basic state pension from 44 years for men and 39 years for women to 30 years for everyone.

We either have to pay more tax or we work longer
John Hutton

According to the government, by 2010, 70% of women reaching state pension age would have a full basic pension compared with only 30% today, increasing to more than 90% by 2025.

Mr Hutton said a pensioner in the 2050s who had contributed for most of their life through working or caring would be entitled to about 135 a week from state pensions in retirement - instead of between 90 and 100.

Ahead of a speech on the subject he told the BBC: "If we want a more generous state pension - which we are doing now with a link to earnings - then there are some very simple economics about this.

"We either have to pay more tax or we work longer."

HAVE YOUR SAY
I have not even hit 30 and I feel burned out. I don't know how I am going to make it to 40, let alone 68
Chris Rabe, Twickenham

He said there would be plenty of jobs for older workers: "The labour market is changing, our pension system will have to change to reflect that."

Later, addressing the Association of British Insurers, Mr Hutton said: "As unpopular as it may be to talk about working longer - the simple fact is that if we aren't prepared to increase the state pension age, we will simply pass an ever greater and frankly unsustainable burden on to our children and grandchildren."

And he warned critics of the move would be effectively arguing for "more than a 4p rise in the basic rate of income tax".

'Lock in stability'

Mr Hutton said that it was necessary to "lock in stability in pension's policy to allow future generations to plan ahead with confidence".

"We need to be straight with people on this crucial issue so they know where they stand and can plan accordingly."

The increase in the retirement age is to be kept under regular review to ensure life expectancy, especially in deprived areas, is keeping up.

Mr Hutton said life expectancy was increasing in all parts of the country.

"In Scotland, for example, where life expectancy has been lower, longevity is now expected to improve faster than in other parts of the UK.

"And the increase in state pension age to 68 will still leave men in Scotland with a longer period of time above this pension age."

Liberal Democrat pensions spokesman David Laws said it was inevitable that the state pension age would have to rise.

But he added: "Such a rise is only acceptable if people know that when they retire they will be able to afford a basic standard of living.

"At present the government is asking people to work longer while refusing to guarantee them a decent and fair pension."




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John Hutton explains why we need to work longer



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