Don't bank on retiring at 65

WORKERS can no longer expect to reach 65 and 'hang up their boots', David Blunkett has warned. The new Pensions Secretary insisted many would inevitably have to work longer in the future to help plug a looming black hole in Britain's pensions system.

The Tories have accused the Government of 'negligence' over the crisis, blaming Labour's £ 5bn annual tax raid on savings funds.

In his first major speech in his new job, Blunkett warned of the harsh realities facing the country. He said: 'When the pension system was set up, there were ten people in work for every one in retirement. We are now down to a ratio of four to one, and in the next 50 years that will come down to two to one.

'We have got to break down the barriers between our working time and our retirement. We need to introduce schemes which allow people to come back to work. We need to encourage people to stay on part-time, to do part-time work when retired, and make sure it is not a disincentive.'

Blunkett - brought back into the Cabinet only five months after he quit over the 'nanny's visa' affair - said he wanted to 'challenge people to think responsibly about themselves, about their future and about what they want.' His comments came as he addressed the National Association of Pension Funds annual conference in Manchester.

Earlier, he had warned that people could no longer rely on the State to 'dig them out of poverty'. He said it was clear they needed to start saving more money earlier in their lives to pay for their old age.

He said all options remained open as the Government prepared to tackle the pensions crisis. But he gave a heavy hint that he is considering forcing people to save. He told BBC Radio 4's Today programme: 'I haven't ruled out the issue of some sort of means of ensuring that people do save.'

During the General Election campaign the Tories repeatedly challenged Chancellor Gordon Brown on how the Government planned to tackle the pensions timebomb - and whether another hike in National Insurance will be needed to pay for it.

Experts say millions will have to be compelled to save more, taxes will have to rise or people will be forced to work beyond 65 to help close a £57bn shortfall in public and private pensions provision.

Senior Labour MPs were uneasy that the party went into the election without any firm commitments on how it will deal with the problem. Instead, ministers say any firm decisions will have to wait until the Government's pensions czar Adair Turner completes an investigation this autumn.

Blunkett's promise of swift action could set him up for conflict with the Chancellor, who insisted during the election campaign that any major reforms to the pensions system would not come in this Parliament but the next.

Blunkett said none of the three options outlined by Turner - higher taxes to pay for better state pensions, an increase in the retirement age, or people saving more in private pension schemes - would do on its own. 'We are talking about how do you raise the money and at what point do you become eligible?' he said.

Other options included getting more people in work and off incapacity benefit, and attracting immigrants on a 'legal and managed basis' for short-term vacancies. Blunkett said he wanted to achieve a cross-party consensus on a solution for the next 50 to 100 years, so that reforms would not be unpicked by successive Governments.

Challenged about Labour's £5bn-a-year tax raid on pension funds, Blunkett said that if the Tories stopped mentioning it, he would agree not to talk about the scandal of private pension mis-selling when they were last in power.

The Tories' new pensions spokesman, leadership contender Sir Malcolm Rifkind, seized on the comparison. 'Mr Blunkett appears to be comparing Gordon Brown's removal of £5bn tax credits from the pension funds to the pensions mis-selling scandal of the 1990s.

'He is right on one count, but wrong on another. The £ 5bn confiscation is indeed as serious for future pensioners, if not more so, than the mis-selling scandal. Where he is wrong is that the £5bn confiscation is not a thing of the past. It continues every year and will do so until the Government reverses the policy. The Government has it within its power to revive the savings and pensions sector. That is what Mr Blunkett should be telling Mr Brown.'

Tony Blair, speaking at his monthly news conference yesterday, agreed nothing was 'off limits' on pensions reform. But he added: 'Compelling people to save in circumstances where - if you are talking about someone on a very modest income - it is very tough for them to do that.'

Pensions czar Turner backed Blunkett by saying that as well as providing a basic pension, the Government needed to encourage people to make more provision for their future. He said he was undecided on whether an enhanced voluntary system or compulsion was the best solution.