Workers to save for second pension

Britons could be forced to save £7 a week for a second pension under plans to cope with the growing elderly population.

The compulsory Universal Protected Pension (UPP) would pay out up to £136 a week on top of the standard state pension at 65 and, it is hoped, save the welfare system from collapsing.

The proposal was published today by the Pension Reform Group, a think-tank headed by former Labour minister Frank Field and City finance experts.

Work and Pensions Secretary Andrew Smith is widely expected to adopt the idea, or a variation on it, after a review of the pensions system next year.

The current tax-funded state pension was designed for tiny numbers of over-65s compared with the working population. Longer life spans mean that by 2020 there will be one pensioner for two working people.

The UPP would guarantee to pay out 25 to 30 per cent of average earnings - worth £5,900 to £7,082 at today's rates, but it would not be paid out until people reach 70.