Pension pledge 'to be delivered'

Last month, the government said the link between increases in the state pension and earnings would be restored in the next parliament.

But it added that the promise would be subject to an affordability test.

Mr Hutton told the Department for Work and Pensions Select Committee: "Get real, this policy will be delivered."

Affordability clause

"We believe this is affordable in the next parliament. We are aiming to do it in 2012"
John Hutton, Work and Pensions Secretary

The government's White Paper on pensions was published last month.

At the time, there were eyebrows raised when the pledge to restore the earnings link came with the caveat that it was "subject to affordability and the fiscal position".

Some experts suggested that this was a get-out clause, negotiated by the Treasury.

Treasury sources had previously expressed doubts at the costs of restoring the earnings link.

Mr Hutton told MPs that even when Prime Minister Tony Blair leaves Downing Street that restoring the earning link would go ahead.

"We believe this is affordable in the next parliament. We are aiming to do it in 2012," Mr Hutton said.

But again Mr Hutton chose to attach a health warning to the pledge stating that "no government ever does anything that is unaffordable."

Prime Minister Tony Blair has said that he will stand down before the next General Election, which must be held by 2010, and Chancellor Gordon Brown is widely expected to be selected by the Labour Party as his successor.

Reforms

The White Paper is the government's response to the report of the Pensions Commission headed by Lord Turner.

In a series of three reports the Commission looked at the UK pensions system and made recommendations for reform.

The White Paper contained the following key proposals, signalling the biggest shake-up of pensions for years:

• The state pension age for men and women will increase to 66 in 2024, to 67 in 2034 and 68 in 2044. Each rise will be phased in over two years

• The state pension will rise in line with earnings, not prices, from 2012, subject to affordibility.

• The number of years it takes for people to qualify for a full basic state pension will be cut to 30, compared to 44 or 49 now.

• From 2012, people will be automatically enrolled into a new, low-cost national savings scheme, albeit with the chance to opt out if it is not suitable for them.

Rejection

Mr Hutton defended his decision to reject two key proposals of the pensions commission.

Firstly, he restated that there would be no standing commission to oversee UK pensions policy on the grounds that he did not want to set up "another qango."

However, the minister said he would like to undertake "periodic reviews" of the progress to "ensure direction of travel remains the right one."

The minister added that he had decided to retain the idea that entitlement to a state pension should be earned through National Insurance Contributions (NICs).

"The something for something principle is a very important principle," the minister said.

Last year, the Pensions Commission called for state pension entitlement to be linked to residency in the UK, whether or not the person had been working.

RELATED INTERNET LINKS
Pensions Reform White Paper
Work and Pensions Select Committee
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