So what do the new proposals mean for you?


What does Lord Turner want to do with pensions?

Lord Turner is standing by all the recommendations his Pension Commission made last November. It called for a gradual increase in the state pension age - to 69 by 2050 - and the launch of a new private pension scheme, the National Pensions Savings Scheme (NPSS). All workers would be enrolled unless they have specifically opted out.

Does this mean I'll have to work for longer?

Not necessarily. This is simply the age at which you can begin claiming the state pension. If you have other resources - private pension savings, say - you may be sufficiently well-off to retire at a younger age.

Will state pensions become more generous?

Lord Turner says the basic state pension should be paid to all UK residents, irrespective of the national insurance contributions they have paid. He also suggests restoring the link between increases in the amount paid and average earnings. Currently pensions go up in line with prices, which tend to increase more slowly. But even if the reforms are adopted, the basic state pension would be worth just 17 per cent of the average person's pre-retirement salary.

Surely I'm not expected to live on that?

Those who have no other income or savings won't have to. The pension credit, the top-up benefit currently paid to poorer pensioners, will still be available. However, Lord Turner's proposals would reduce the amount of means-testing in the pension system.

What about my work pension scheme?

Employers with more generous pension schemes won't have to join the NPSS. Members of existing final salary and money purchase pension schemes may therefore be unaffected by these reforms, though some employers may cut back on benefits to the minimum required. Employees who don't currently have access to a decent pension scheme will be automatically enrolled into the NPSS, unless they opt out.

What if I'm self-employed?

Self-employed workers will be able to join the NPSS under Lord Turner's proposals, as will people not in work.

What's this going to cost?

It depends who you believe. The Pension Commission's report said public spending on pensions would need to go up from 6.2 per cent of GDP today to between 7.5 to 8 per cent in 2050. But the Chancellor thinks the costs could be higher. Gordon Brown warned yesterday that taxes might have to rise to pay for the reforms.

When will all this happen?

Lord Turner said in November that the NPSS could be set up by 2010 and that many state pension reforms could also be implemented by then (though the increase in the state retirement age won't happen before 2020). However, we don't yet know when the Government will publish a White Paper on pensions reform and with the Cabinet at odds over the proposals, delays look inevitable.

So the ball is back in my court? What should I do?

Even if Lord Turner's reforms are implemented, you won't be able to rely on the NPSS. The commission calculates a 35-year-old joining the scheme on a salary of £23,000 could expect a pension from the NPSS of just £3,000 a year in today's money. The only way to generate a decent pension is to save as much as you can afford while you're still working.

Pensions by numbers

* £57bn Gap between what people are saving and should be saving to maintain their standard of living in retirement

* 66 Percentage of men between 25 and 34 who expect to retire before 65

* 76 Percentage of women expecting to retire before 60

* £420,000 Amount a non-smoking 65-year-old male would need to buy an inflation-proof income of £20,000 a year for life

* £30,000 Average size of people's pension pots at retirement age

* 20.4 Average number of years a man will live beyond the state retirement age today

* 25.1 Average number of years a woman will live beyond the state retirement age today

* 42 Percentage of workforce contributing to a private pension today

* 6.1 Percentage of GDP spent on pensions in Britain

* 22 Percentage of earnings you need to save every month, if you don't save for a pension before 40

* 12 Percentage of earnings you will need to put away if you begin at 25

* 24 Percentage of earnings that adults under 30 spend on restaurants, hotels, recreation, alcohol and tobacco

The key points

* Lord Turner proposes raising the state pension age between 2020 and 2050, from 65 to 69. The retirement age for women is to rise from 60 to 65 between 2010 and 2020.

* The Pension Commission argues that the Basic State Pension should become more generous. It would be paid to all UK residents, irrespective of their National Insurance contributions.

* Means-testing should be steadily reduced, the Commission says, though top-up benefits such as the Pension Credit would be retained to protect those on low incomes.

* The Second State Pension should be retained, says Lord Turner, but should eventually be paid at a flat rate. Those who qualify for the full Basic State Pension and the maximum Second State Pension would get a pension worth about 30 per cent of average pre-retirement earnings.

* Lord Turner calls for a new private pension scheme, the National Pensions Savings Scheme, administered at low cost to produce as much income as possible in for members.

* To fund his proposals, Lord Turner says Government spending on pensions should rise from 6.2 per cent of GDP today to between 7.5 and 8 per cent of GDP by 2050.

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