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Last call for Pensions Commission. By Dan Martin

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4th Apr 2006
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The government's Pensions Commission has today published its final conclusions on the future of the UK's state pension regime.

Unveiling the report, Lord Turner, the Commission's head, defended its proposals to increase the basic state pension in line with earnings, raise the state pension age to 68 and introduce a compulsory national savings scheme.

Hitting out at the current system by saying it was not "fit for purpose", the peer added that a purely voluntary scheme would not work effectively and his proposals were affordable.

The Commission calls for pensions to be linked to earnings rather than inflation and proposes that the basic state pension age should gradually increase from 65 to 68 by 2050.

It says the whole system should be backed up by a National Pension Savings Scheme (NPSS), into which many employees would be automatically enrolled into and to which employers would be compelled to contribute.

Speaking at a press briefing this morning, Turner said there was "almost universal support" for automatic enrolment in the NPSS.

He added there was also "considerable support" for employer compulsion but acknowledged the "legitimate concerns" raised by business organisations about the costs of obligatory contributions for small firms.

He said it was now up to the government to implement the proposals.

"The government now faces the difficult challenge of deciding how far and how fast it can move towards the reform of the state pension system we proposed, in light of other claims on public expenditure," Turner urged.

It has been widely reported that prime minister Tony Blair and chancellor Gordon Brown disagree on the implementation of the proposals and today's report is likely to increase the tensions between them

It is believed Blair wants to put Turner's ideas into operation whereas Brown is opposed because he believes they would be too expensive.

The government is due to formally respond to the Commission's proposals later this spring.

Business groups meanwhile warned the government that forcing businesses to contribute to employees pensions may prove seriously damaging.

British Chambers of Commerce director general David Frost said it could be the "tipping point" for some firms.

"Businesses are already struggling to cope with an increasing raft of complex employment legislation. They are finding it impossible to recruit skilled staff ' often taking on migrant workers to fill gaps," he said.

"They are also trying to get their goods and staff around the country in the face of a failing transport system. And meanwhile energy costs rise relentlessly. Forcing firms to pay into a pension scheme is just a step too far."

A survey released yesterday by the Forum of Private Business (FPB) found 70% of small firms said they would not be unable to afford compulsory contributions.

Three fifths said they would be forced to freeze recruitment if the proposals were implemented while 42% claimed it would prevent them investing in their business.

Only 13% said they would not be affected.

Nick Goulding, FPB chief executive, said: "People running small businesses recognise there is a pension crisis and something must be done, but most of them do not believe employers should be compelled to contribute to a fund.

"What they are saying is that the government cannot simply continue to load more taxes and costs on to small businesses. Many of them struggle to survive against increasing competition, often from low-cost countries."

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