Parliament & Politics: Blair says pensions system needs `fundamental reform'

PENSIONS

THE PENSIONS system, which is currently under review, is likely to be fundamentally reformed, the Prime Minister hinted yesterday.

Tony Blair came under pressure during question time to spell out his plans for pensions reform, including the role of compulsory pensions, by Paddy Ashdown, the Liberal Democrat leader, who accused him of being "confused" about the issue. Earlier this week, The Independent revealed that the Government is considering proposals under which middle-income earners could be forced to contribute to a pension fund to ensure they provide for their own retirement.

Mr Ashdown said the only sensible way forward for the Government was to introduce compulsory second-tier or stakeholder pensions just as Frank Field, the former Welfare Reform Minister was due to propose next week.

"There is only one sensible way to solve this problem in a practical manner, and that is to introduce compulsory second-tier or stakeholder pensions?" Mr Ashdown asked.

Insisting he would not comment until the Government's pensions review was published, Mr Blair said pensions needed "full-scale reform".

"We have got fundamentally to reform the system. We are taking on an issue that, for 18 years, was ducked by the previous Government," the Prime Minister said.

Alistair Darling, the Social Security Secretary, is convinced that the Government must insist on mandatory payments to the new "stakeholder pensions" by people not in occupational or personal schemes.

During a later exchange, Alan Simpson, Labour MP for Nottingham South, urged the Prime Minister to restore the link between earnings and pensions to mark Armistice Day.

"Surely if there is an act of remembrance that this country owes to the generation of today's pensioners, it is to do the one thing which the Tories steadfastly refused to do, namely to restore the value of the state pension and its link with earnings," Mr Simpson said.

Replying, Mr Blair explained the cost of such a measure would be too great. "It would not be spread amongst those pensioners who needed that money most," he added.