National Insurance rise 'to force pensions saving'

National insurance could go up by 1.5p in the pound under controversial government plans to force British workers to save more for their pensions.

Compulsory contributions are being considered by ministers as a solution to the looming pensions crisis.

But the idea of raising the retirement age from 65 to 70 has been dropped, it emerged today.

Under the plan, the current pension of ?79 a week would rise to more than £100 with the £10 billion bill met by increasing NI and scrapping meanstested benefits for over-sixties.

The proposal is likely to be the centrepiece of a report for Adair Turner next month. Some ministers, including Gordon Brown, are thought to have wanted the report delayed until after the general election because the issue of forcing workers to save more is highly politically sensitive.

But Mr Turner, chairman of the Pensions Commission, is expected to raise the prospect of compulsion because it is one of the few simple ways of tackling the issue. Other ideas will include compulsory contributions to the second state pension and private pensions,

together with allowing people to receive part of their pension while working beyond retirement age.

The main plan would fit with moves by some in Downing Street to scrap the wide array of means-tested benefits used currently.

The benefits cost about ?6 billion a year, but a further £4 billion could be found by adding 1.5 to the present 11 per cent rate of employee NI contributions.

Scrapping means-tested benefits is likely to trigger further conflict between Mr Blair and his Chancellor.