State pension under threat says Harman

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Harriet Harman last night claimed the Tories could scrap the state pension after the disclosure of plans to require pensioners to take out private "top up" schemes.

"The writing is on the wall for the state pension," Labour's shadow social security secretary said after reports that the Downing Street policy unit was working an election manifesto plan to require people to take out private pensions to replace State Earnings Related Pensions (Serps).

The Government said the reports were "speculative" but support for the total privatisation of state pensions came from the Tory Bow Group in a policy paper by Geoffrey Clifton-Brown, Tory MP for Cirencester and Tewkesbury. He said the current state pension was a poor investment and investing two thirds of national insurance contributions in a private fund could deliver pounds 280 a week.

Alistair Darling, a Labour Treasury spokesman, said 500,000 people had been mis-sold private pensions after a Government drive to switch people from Serps. "People will be deeply suspicious of a Government with such an appalling record actively encouraging people to do it again," he said.

Figures yesterday released by the Department of Social Security showed that the bad publicity could be hitting the schemes. About 5.56 million people had personal pensions in 1994-5 but that was a fall of 100,000 on the previous year.

But in her first major speech since taking over the social security portfolio in the summer, Ms Harman yesterday stated Labour's commitment to renew the welfare state. She said the welfare state must be ahead of economic and social change, not lagging behind.

On pensions, she committed Labour to introducing a "flexible decade" of retirement, in which people could take reduced state pensions, if they wanted to retire early.

"Labour believes with a flexible decade of retirement the state pension could give significantly more choice about when they retire. It would make a significant contribution towards giving people more choice and fit in with today's lifestyles and work patterns," Ms Harman said.