Blunkett may force saving for pensions

DAVID BLUNKETT has signalled that workers could be forced to save for retirement as he promised 'quick and decisive' action to resolve the pensions crisis.

The new Work and Pensions Secretary, back in the Cabinet five months after he quit over the ' nanny's visa' affair, wasted no time in putting his stamp on the pensions debate.

He made clear he would have no compunction about introducing compulsory pension contributions for all workers - even though Tony Blair dodged the issue during the General Election campaign.

Blunkett intends to see former CBI chief Adair Turner this week to discuss his inquiry into the pensions crisis. Turner's recent interim report revealed a huge shortfall in pension provision. His final report is due soon.

Blunkett said he wanted cross-party consensus for any package of reforms but made clear that he was not ruling out compulsion, even though it could prove politically unpopular. Asked by the BBC's Sir David Frost if compulsion was still an option, he replied: 'I made it clear when I talked to the Prime Minister on Friday evening that there are no off-limits here.'

He signalled swift action, despite both Blair and Chancellor Gordon Brown having said during the election campaign that any reforms would not come in this Parliament but the next. 'We have got to be able to address quickly and decisively where we are going,' said Blunkett.

'I want to build a consensus so I want, with Adair Turner, to be able to reach out to the other major political parties because we need a lasting solution for the decades ahead - not a quick fix.'

The initial Turner report found 12.1m people aged 25 or over are failing to save enough to enjoy a comfortable retirement.

Blunkett outlined what he called the 'enormity' of the problem ahead. 'Fifty years ago we had a situation where people on the whole lived ten years after retirement and retirement was, on average, at the age of 67,' he said.

'Now we have a situation where people live on average 20 years longer. They want to retire earlier. The average age of retirement is below 65. But the number of people of working age sustaining those in retirement has dramatically fallen.

'A hundred years ago, when we started today's pensions scheme, there were actually ten people in work for every one in retirement. In the middle of this century there will be two people in work for every one in retirement. When you grasp those facts you see that this is not a solution for Government - it is a solution for all of us.'

Foreign workers could play a role in meeting the shortfall, said the Work and Pensions Secretary. 'You can bring people in through legal migration for a period of time to fill particular vacancies and to help fund the services of the future including those in retirement,' he added.

However, he said, it was 'crucial' that his department met its target of getting 80% of the working population into employment. Last month, a report by pension experts Aon Consulting claimed taxpayers would face a £4bn a year bill if workers were forced to save more for old age.

Under compulsion, money that would previously have gone in wages or profits, which are taxable, would go into pensions savings which attract tax relief. That would create a gap in government finances.

Paul McGlone, of Aon, said: 'Someone would have to fill the hole and that is most likely to mean tax rises. We should be making the voluntary system work better.'

Aon calculated the £ 4bn figure on the basis that firms and their workers would be made to put aside a total of 9% of their annual salaries.