Dewar puts case for pension alternatives

THE CLEAREST sign yet that Labour has abandoned all thoughts of substantially raising the basic state pension came yesterday in a speech by Donald Dewar, the shadow Secretary of State for Social Security.

Arguing instead for a 'guaranteed income in retirement' scheme, Mr Dewar said the basic pension was 'literally going down the plug hole' and could be worth only 7 or 8 per per cent of male average earnings by 2030.

But raising it would not be enough, because of the cost and because poor pensioners would not be helped. The benefit would go to the better off while the poor would have the extra entitlement clawed back from income support, he said.

Labour's 1992 election manifesto pledged pounds 5 and pounds 8 a week across the board increases for single pensioners and couples, at an estimated cost of pounds 2.7bn a year.

Under the guaranteed income in retirement formula, an individual's pension income - occupational or private, and state - would be measured against a minimum and any shortfall made up.

The scheme would mean the end of large numbers of elderly people relying on income support to supplement the basic sum - pounds 57.60 from April for a single person and pounds 92.10 for a pensioner couple.

About 1.6 million old people rely on the benefit. But 1989 figures, the latest available, show that one pensioner in three eligible for income support did not claim it. An alternative solution would be to combine the tax and benefit system but limit that change to pensioners.

Mr Dewar said there could still be a role for the State Earnings Related Pension Scheme for people such as the disabled who faced difficulty in building up an occupational or private pension.