'Work longer and get better state pension'

Britain's workers will receive a more generous state pension in return for working longer, it was reported today.

Under recommendations from Lord Turner's Pensions Commission, due to report at the end of the month, the age at which people will be eligible to claim the state pension will rise over time from 65 to 67, according to a report in the Financial Times.

The Commission was set up to review pensions amid fears that many Britons are heading for poverty in old age.

Other expected recommendations include a new national savings plan in which people will automatically be enrolled when they start a job, with the right, for a limited period, to opt out, according to the report.

The state pension should also be closer to the £109-a-week means-tested minimum income guarantee rather than an £80-a-week basic state pension, the Commission is expected to say.

The pension should rise in line with earnings, not just prices, and the changes will be phased in after 2020 when the women's state pension age is aligned with men's at 65, the report said.

After that, the age should rise in accordance with the rate at which people are living longer, it added.

The Commission is also thought to be looking at ways of making the state pension more generous, either through scrapping the existing second state pension and its associated rebates, or by keeping it but making it flat rate.

Figures out today also showed that fewer than six out of 10 final salary pensions are still open to new members after more companies closed their scheme during the past year.

Just 58% of final salary schemes still accept new entrants, falling to 43% among private sector employers, the National Association of Pension Funds (NAPF) said.

During the past 12 months, a further 37 employers closed their final salary pension to new members, roughly the same number as the 36 who did so during the previous year.

NAPF said the figure was well down on the 107 employers who closed schemes in 2003, suggesting that most firms who were going to close their schemes to new members had already done so.

The group said pension providers remained worried about how they would afford to run schemes in future and they were particularly concerned about the deficits they faced, levies for the pensions safety net the Pension Protection Fund, regulations and running costs.

As a result of these pressures, just under one in four employers expects to close its final salary scheme to either new entrants or future accruals in the next five years.

The survey also found that firms were looking at new ways to contain costs without having to close their scheme, such as by increasing contributions, reducing the rate at which members accrued benefits or opening a defined contribution scheme to replace the final salary one.

The survey of more than 400 employers operating over 1,100 pensions found that 45% of companies had either increased contributions or made a one-off contribution to their scheme during the past year.

The NAPF chief executive Christine Farnish said: "Employers have been struggling with the increased costs of providing workplace pensions for some years now. The last year has seen another hefty chunk of regulation and cost piled on to them.

"It is to their credit that so many have retained schemes which continue to provide valued retirement benefits for millions of Britons. But this year's survey provides more evidence that many are at or near breaking point."

The survey was published ahead of the NAPF's Autumn Conference, which is being held at the Queen Elizabeth II Conference Centre in Westminster, central London, today.

The conference is expected to focus on the forthcoming report by the Pensions Commission, and delegates will be addressed by Minister for Pensions Reform Stephen Timms, who will talk about the Government's plans for pensions.

Baroness Hollis of Heigham will also talk about improving women's pensions after a recent Government report showed that 2.2 million women were failing to accrue any right to the basic state pension.