Pensions shake-up to be unveiled

In return, future increases in the state pension will be once again linked to earnings rather than prices.

Tony Blair said the publication of the White Paper represented a "landmark day" for pension reform.

He said he believed the proposals would form the basis of public pension provision for "generations to come".

Earnings link

The White Paper, due out later on Thursday, is the biggest shake-up of pensions for years.

In the paper, the number of years of National Insurance contributions it takes to earn a full basic state pension is to be cut to 30.

The link between pensions and earnings is due to be restored, with Pensions Commission Chairman Lord Turner saying that this would take effect from 2012.

"The package will, I hope, receive a very broad welcome"
Tony Blair

The paper will also outline the government's intention to set up a National Pension Saving Scheme (NPSS).

Under the NPSS proposal, people who do not belong to a workplace pension scheme would be automatically enrolled.

Employees would contribute 4% of their salary, employers 3% and the government 1%.

The Prime Minister said the scheme would give offer people a low-cost way of supplementing the state pension.

"The package we have, based on the Turner Commission, will I hope receive a very broad welcome - not only across the political spectrum but among those engaged in providing pensions for people," he said.

'Reasonable compromise'

Lord Turner told Radio 4's Today programme that 2012 was considered a "reasonable compromise" between the need to set a basic pension which is rising in line with earnings over the long-term and concerns over when that becomes affordable.

"I think that will be accepted as part of just what is going to happen and I do think this will become a commitment that can't be diverged from," he said.

"The White Paper will affect everyone in the country because the state pension system is being reformed for the first time in a generation"
Tom McPhail, Hargreaves Lansdown

How the White Paper is shaping-up

The fact that employers would be compelled to contribute to their workers' NPSS has angered business but is supported by the unions and some consumer groups.

However, TUC general secretary Brendan Barber said he was "disappointed" at plans to increase the state pension age.

Leaks

Much of what will be in the White Paper is already known, thanks to leaks and a series of ministerial speeches.

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John Hutton, Work and Pensions Secretary, has said the White Paper will, in the main, mirror the recommendations of the government's Pensions Commission.

In a series of three reports the Commission, headed by Lord Turner, looked at the UK pensions system and made recommendations for reform.

The Commission concluded that unless the state pension was overhauled and private savings boosted, millions of Britons were headed for a meagre old age.

"The White Paper will affect everyone in the country because the state pension system is being reformed for the first time in a generation," Tom McPhail, head of pensions research at Hargreaves Lansdown, told BBC News.

But Mr McPhail said that the White Paper was a staging post rather than a final destination for UK pensions.

In particular, who will get to run the NPSS - the government or insurance industry - is likely to be put out to consultation, Mr McPhail added.

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