One option being considered is a rebate from National Insurance contributions, worth pounds 10 a week, to encourage more people to invest in Government-approved pension schemes for their retirement.
John Denham, the social security minister, will announce a period of consultation leading next year to a Green Paper on the options for improving pension provision in the next century. Only after further consultation will legislation be proposed.
The announcement may calm tensions with the private pensions industry which were heightened by the Chancellor's Budget decision to abolish the tax relief received by pension funds on dividends paid to them.
The Tories claimed the move to raise pounds 5bn a year by 1999 amounted to a "smash-and-grab raid". The National Association of Pension Funds described it as the biggest attack on funded pension provision since the war.
Pensions firms were also angered by the "name and shame" policy adopted by Helen Liddell, the Treasury minister, to force faster progress from pensions companies who were slow in compensating victims of pensions sales in the 1980s. There have been hints that firms who fail to meet the deadline in December 1998 could be excluded from the Government "stakeholder" scheme.
Labour fought the election on a policy of maintaining the state pension with increases linked to inflation, plus a top-up pension or "stakeholder" scheme. The review could lead to greater involvement in the scheme by the private sector.
The Government remains committed to the policy of a stakeholder pension, but the caution with which it is proceeding suggests ministers are keen to keep the pensions industry "on board" for its changes.
Pensions flared into an election row when Labour accused the Tories of threatening to abolish the state pension with their "pension plus" plan, which would have required all young people to take out private-funded pensions.
The pensions minister, Frank Field, said after the election that the next big issue for Labour would need to be the fostering of new forms of association to take pressure off state provision. The electorate wanted high Continental-style benefit levels and low American tax rates, but there was no way this "dream" could be met.
The long-term framework for second pensions, promised by Labour, "would be developed through partnership with and competition between the private sector, to provide better value-for-money for people without access to occupational schemes".Reuse content