Tories warn of tax rises caused by pension review

A wide-ranging review of pensions could be used by Tony Blair and Gordon Brown as an excuse to raise taxes, the Conservatives have warned.

The Government is expected to back a gradual rise in the state pension age from 65 to 67, which looks as if it will be recommended on 30 November by the Pensions Commission, chaired by Lord Turner of Ecchinswell, the former director of the Confederation of British Industry.

In return, the basic state pension could rise from £80 to more than £100 a week. The proposals would take effect after 2020 and apply to everyone now under 50.

Lord Turner is likely to call for the pensions timebomb to be defused by a combination of the three options he outlined in his interim report last year: higher taxes, people saving more and working longer before retiring. Workers would be automatically enrolled into a national savings plan when they started a job but would retain the right to opt out.

Although the Treasury is reluctant to use taxes to help bridge the savings gap, the Tory opposition claimed yesterday that Labour could hide behind the Turner report as it raised taxes to fill an estimated £10bn "black hole" in the public finances. It recalled that Mr Brown had used a review of health spending by Derek Wanless to increase national insurance to boost NHS funding.

Sir Malcolm Rifkind, the shadow Work and Pensions Secretary, said taxpayers could be hit by a "double whammy" of tax rises. "The Labour Government has contributed to the pensions crisis in this country by attacking the savings culture," he said. "The savings ratio has nearly halved since Labour came to power, from 9.6 per cent in 1997 to 5 per cent in 2005," he said.

He accused Mr Blair of double standards, saying he was forcing other people to work longer while allowing existing public-sector workers to continue to retire at 60 under a deal struck with the trade unions.

Stephen Timms, the Pensions minister, hinted that the Government would support a later retirement age but refused to confirm it would be raised to 67. "The age of retirement is going up because people are wanting to work longer," he said.

He told the National Association of Pension Funds' autumn conference in London that work "was the best pensions policy".

Downing Street said that when the welfare state was launched after the Second World War, there were 10 people in work for every one in retirement. Today the ratio is 4:1 and in 50 years, it will be 2:1.

But Derek Simpson, general secretary of the Amicus union, said: "While we support an increase in the basic state pension, any increase in retirement age will be opposed by Amicus. The statistics show working longer leads to earlier deaths."

Neil Churchill, the director of communications for Age Concern, said: "It could particularly affect those on low incomes who rely most on state pensions and tend to have lower life expectancies." But Alan Pickering, who chaired an earlier inquiry on pensions, said raising the retirement age was "an essential pre-requisite of modernising the pension system".