Labour dismisses pensions plea

RADICAL proposals for overhauling pensions - including the restoration of the earnings link for the basic State benefit - have been rebuffed by ministers. Work and Pensions Secretary Alistair Darling has dismissed as 'simplistic' a report to be published on Wednesday by influential think-tank, the Institute for Public Policy Research.

There is growing concern that many people in their thirties will not be covered for their retirement because firms have switched to pension plans linked to the unpredictable stock market.

The report by the IPPR, which normally has close links to Prime Minister Tony Blair, rejects the Chancellor's proposals for pension credits for the poorest. Instead, it is expected to call for the earnings link to the basic State pension to be restored, 20 years after it was abolished by Margaret Thatcher.

The report warns of a pensions timebomb with millions having to work into their seventies unless the system is overhauled. It suggested raising the retirement age to 67 and also called for the scrapping of the second State pension, Serps.

The report followed last week's study by the Pensions Policy Institute which warned that people in their twenties and thirties will have to work until they are 72 unless they start saving more for their retirement.

Sources estimated that restoring the link with earnings would cost the Government nearly £31bn by 2020. Darling said: 'The IPPR expect their proposals to be paid for by raising the retirement age for State pensions, something that couldn't happen for 20 years. These ideas are neither workable nor affordable.'