Earnings link restored in Pensions announcement

26 May 2006
In plans announced today, work and pensions secretary John Hutton has committed the government to restoring the link between earnings and pensions.

The link, which was originally cut in 1980 by Margaret Thatcher, will see an end to pensioners' earnings decreasing in value relative to inflation.

Many other suggestions by the Turner Report are to be included in the White Paper, such as a graduated increase in the state pension age to 68 by 2044 and a National Pension Savings Scheme (NPSS) with automatic enrolment.

However, pensions expert Dr Ros Altmann warned that the government needed to work to restore public confidence in pensions provision.

In comments broadcast today on Sky News, Dr Altmann said: "The problem is that over the years governments have kept trying to cut the state spending on pensions for the long-term.

"They thought that everybody would be able to rely on private pensions invested in the stock market to bail the whole thing out so that it did not matter if state pensions were too low."

The move comes after great concern that the government's system of means-testing was proving a disincentive to save, with lower income earners seeing benefits reduced in proportion to any increase in their savings.

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