Turner attacks Treasury over pension 'porkies'

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Lord Turner of Ecchinswell angrily rejected attacks on his pension reform proposals yesterday, dismissing criticism from the Treasury and business leaders. The Pensions Commission chairman reportedly accused Treasury officials of "telling porkies" after the Government suggested the true cost of his reforms to state pensions could reach £16.4bn a year by 2020.

The row followed a dispute over the base figures that each side is using for comparisons. On Wednesday, the Commission claimed the cost of restoring the link between the basic state pension and earnings would rise from £200m in 2010 to £2.1bn in 2020.

This assumes that the Government is prepared to reinvest the savings it makes as the state pension age for women rises from 60 to 65 over the decade. Lord Turner also assumed the Government would maintain the current link between earnings and the Pension Credit, the top-up benefit paid to low-income pensioners.

The Chancellor has already warned this link has been promised only until 2008. Assuming it is severed then and that the equalisation savings are taken out of Lord Turner's calculations, the Treasury said the cost of the reforms would rise to £16.4bn.

Lord Turner said last night he accepted it was possible to use different assumptions for costing his proposals. But he warned: "Unless we want the state pension to get meaner and meaner we have to have either higher tax or a higher state pension age, and we have decided on both."

Lord Turner added that if the Treasury genuinely intended to cut the link between the Pension Credit and earnings, there would be uproar among poverty campaigners.

"That would reduce the relative living standard of our poorest pensioners by about a quarter," he said.

The Commission chief also rejected warnings from business about the cost of requiring employers to contribute 3 per cent of staff salary to a National Pension Savings Scheme.

"We estimate the increase in private sector labour costs will be 0.6 per cent," he said. "There is a good case that in the long term, the effect of the cost on business will be offset by lower cash wages."