Ministers back state pensions opt-out plan

SENIOR MINISTERS favour a scheme for allowing workers to opt out of the state pension as part of the wide-ranging review of policies for reducing the growing cost of the welfare state.

Ministers are alarmed at the burden which the state pension scheme will place on a diminishing ratio of employed people in the next century, and are preparing plans for a voluntary opt-out scheme. Ending the state pension for all is regarded as too controversial to be advocated publicly, but, privately, ministers believe it is the only solution to the insupportable cost of state pensions in 20 years' time.

The scheme, advocated by the Adam Smith Institute, the Thatcherite think-tank, would avoid breaching Tory manifesto commitments because it would be voluntary. Ministers believe it would also prove popular because the pensions available on private insurance schemes would be better than the state could offer.

They believe those who opted out should be allowed to opt back in, if their private pension funds failed, although that view is not shared by the institute.

Meanwhile, Peter Lilley, Secretary of State for Social Security, has decided to equalise pensions for men and women at 65. He will make an announcement before Easter, but it will not come into effect before the end of the decade.

The savings achieved by requiring women to work a further five years are likely to be seized by the Treasury. Mr Lilley is under pressure to propose that some of the savings should be invested in targeting help for women pensioners.

Yesterday, Frank Field, the Labour chairman of the Commons Select Committee on Social Security, urged the Government to adopt a 'Network' scheme. He said those without a job for more than five years should be allowed to continue claiming benefit for a year once they found work which paid pounds 50 a week.