Pensions review raises spectre of cuts

An official review of pensions provision was set up yesterday by Harriet Harman, Secretary of State for Social Security, to explore the problems that persist despite annual public-private contributions worth pounds 60bn.

The review would cover "all aspects of the basic pension and its value and second pensions, including the State Earnings Related Pension [SERPS]; to build a sustainable consensus for the long-term future of pensions; and to publish the Government's proposals for further consultation in the first part of 1998."

Wth the State pensions bill now at pounds 33.5bn, excluding benefits like income support, there is a natural suspicion that the unspoken agenda is a search for savings - with more of the burden to be carried by individuals.

One of the challenges set by Ms Harman included the need for agreement on "where the responsibility for funding pensions should lie, and to establish the right balance between the public and private sectors."

In parallel work, the Government is developing proposals on its manifesto plans for the retention of SERPS, and for the establishment of "a new framework of good-value second pensions schemes - `stakeholder pensions' - to meet the needs of those on low or modest incomes or with changing patterns of employment, and how new partnerships between the pensions industry, employers and employees might be developed".

Excessive charges and the poor value of existing personal pensions provision for the low -paid - especially women - has been a long-standing crusade, in opposition, of John Denham, the new pensions minister.

But if a successful "stakeholder pension" can be established it could provide a com- petitive incentive for existing pension providers to improve their service.

Ms Harman said yesterday: "The failure over the last two decades to develop an adequate pensions strategy has resulted in widening inequalities among pensioners. Too many of our older citizens do not enjoy security in retirement."

Peter Lilley, the shadow Chancellor, dismissed the exercise, saying: "It's really an attempt to obscure the fact that they've just imposed a pounds 5bn tax on pension funds, and a government which does that is clearly not serious about encouraging people to save and invest for the future."

Stephen Webb, the Liberal Democrats' welfare spokesman in the Commons, said the yardstick had to be pensioner poverty. "Around one million pension- ers are currently missing out on the Income Support to which they are entitled," Professor Webb said. "Over half a billion pounds goes unclaimed every year. If this review is to achieve anything, Labour must find a way to get more money now to Britain's poorest pensioners."

Ms Harman said she wanted the review to address a series of "fundamental challenges".

It would be required to achieve sustainable consensus; a response to demographic change; and a reflection of social and labour market change, with the chance for part-time workers, contract workers, wo- men and the self-employed to build up better pensions.

Ms Harman also wanted people to have a better financial education, so they could make more informed choices, and to narrow the gap between provision for men and women.