Labour could impose private pensions levy

JOHN RENTOUL

Political Correspondent

Labour has moved closer to a dramatic switch of policy in favour of compulsory contributions to private pensions to top up the state pension.

Frank Field, the influential Labour chairman of the Social Security select committee, and MP for Birkenhead, has disclosed that a government statistician will cost the plan.

Speculation about Labour support for Mr Field's proposal will be heightened by the fact that Chris Smith, Labour's social security spokesman, flew yesterday to Singapore to join Tony Blair, the Labour leader. Mr Smith will be looking at the Central Provident Fund there, an insurance fund for unemployment, sickness, and old age to which employees are required to contribute.

Mr Smith confirmed yesterday that he was "considering a variety of options for second-tier pensions", and that there were "considerable attractions" in a fund that has "collective strength" and in which the individual has a stake and is told at regular intervals what their bit of it is worth".

A Labour government could not ask taxpayers to pay for higher state pensions, Mr Field said yesterday. He added: "We have no choice but to move to compulsion."

Mr Field has presented a plan for compulsory pension contributions as an alternative to Labour's historic commitment to the State Earnings-Related Pension Scheme (Serps), a top-up to the basic state pension which has been cut back by the government and which enjoys limited public support.

But there is uncertainty about the cost of a compulsory scheme which would have to to provide coverage to those who make little or no provision for themselves.

Mr Field said yesterday that he had raised funds from a charitable trust to commission a report on the possible costs of his plan from the Government Actuary - who provides Parliament with forecasts of social security costs. The report would be completed by February. Mr Smith said he took a close interest in the outcome. He added that he was "very wary of introducing elements of compulsion where there are none at present". He also said that the Singapore scheme was flawed because it excluded "all the difficult cases that the Actuary will look at".

About two-thirds of employees in Britain are members of occupational pensions schemes and another 5 million have a personal pension scheme. But large numbers still rely on the basic state pension, which has been uprated in line with prices, but has lost value in relation to earnings over the past 16 years.

Mr Field's plan, part of a package which includes compulsory insurance for unemployment and long-term care in old age, was mentioned as an "option" in the report of the Commission on Social Justice, set up by John Smith, the former Labour leader. It was also endorsed by a Liberal Democrat study.