Tories target pension 'timebomb'

The details were revealed by Michael Howard and Oliver Letwin

Plans for a tax cut to reward people who save towards pensions have been unveiled by the Conservatives.

Michael Howard said his party would face up to the "pensions timebomb" and take action to deal with it.

For every £100 basic rate tax payers saved for a pension, a Tory government would put in an extra £10 using £1.7bn of the party's promised £4bn tax cuts.

Labour said the Tories' economic plans were "unravelling". The Lib Dems said the plans were unachievable.

Mr Howard said the plans could mean an extra £500 a year for people currently in their late 20s, on average earnings, and who would work until the age of 65.

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Pensions

"People won't get something for nothing, they will only get something out if the put something in," he said.

"If you save, we will boost your savings. If you help yourself, we will help you."

He said the incentive, which would come into force in April 2006, would benefit an estimated 10 million people putting money into personal or company schemes.

Mr Howard also said he did not think compulsory saving was the answer and said the Tories had "no plans" to increase the retirement age within the next Parliament.

Instead they would give the incentive plan time to see what effect it had on the pensions crisis, he said.

'Humpty Dumpty'

And they said they would not reverse Gordon Brown's 1997 decision to scrap tax relief on pension fund dividends, which they have criticised as a £5bn a year "tax" on pensions.

If you don't have the money you are simply conning people Alistair Darling, Transport secretary Tories accused of 'tax con'

They said even if it were reversed, big companies would be unlikely to re-open final salary schemes to new employees.

"Tempting though it is to want to take the world back, in some ways, to 1997, you can't do it in this area. You can't put Humpty Dumpty together again," said Mr Howard.

Of the £4bn tax cuts promised, the Tories have already allocated £1.3bn for a council tax rebate for pensioner households.

Plans for the remaining £1bn, should the Conservatives win the general election, have yet to be announced.

But they have ruled out a rise in income tax or national insurance thresholds.

Labour accused the Conservatives of conning people. Cabinet minister Alistair Darling said the Tories could not meet their promises as they did not have the money.

Under Tory plans the tax take will rise by £24bn and their policies will increase council tax by £200 per household Vince Cable Lib Dem Treasury spokesman

"The Tories cannot afford their tax cuts without even bigger spending cuts than they promised so far, or increased borrowing which would put economic stability at risk, and risk higher interest mortgage rates.

"If you don't have the money you are simply conning people."

Liberal Democrat Treasury spokesman Vince Cable said Conservative tax plans were unworkable.

He said: "The Tories say they will spend more on schools, hospitals and defence, cut taxes and balance budgets all at the same time. This is implausible and unachievable.

"In fact under Tory plans the tax take will rise by £24bn and their policies will increase council tax by £200 per household.

"People are unlikely to be convinced by this desperate attempt to buy votes with cheques that will bounce."